WASHINGTON, Jan. 13 (-) – Former U.S. Federal Reserve Governor Sarah Blum Raskin will be a candidate to run the Fed’s regulatory file, according to a source familiar with the matter. The list is long. These are just a few of the key issues on the Fed’s regulatory agenda.
Over the past four years, Kvarlz has led a review of the rules introduced after the 2007-2009 global financial crisis, noting that they are very open and cumbersome. Democrats have accused Quarles of saving billions of dollars on Wall Street, while at the same time increasing systemic risks.
Among the most controversial changes are the revision of the Volker rule, which restricts speculative banking investments; abolition of the requirement to hold capital in certain swap trades for large banks; and depriving the Fed of the right to fail banks in annual “stress tests” based on subjective concerns.
The new supervisor must decide whether he or she wants to reconsider these changes, which is a time-consuming and time-consuming exercise.
RISKS OF CLIMATE CHANGE
Climate change, which is a policy priority for Democrats, is expected to rise rapidly on the Fed’s agenda under the new leadership.
For now, the Fed has asked creditors to explain how to reduce the risks associated with climate change on its balance sheets, and the industry expects to move to a formal scenario analysis of climate change in 2023.
These projects are expected to accelerate. The big question will be whether the successor to the Quarles will require restrictions or strict capital requirements for banks, which will have a significant impact on the polluting industry or other risks specific to the climate.
The Fed may also sign climate risk lending guidelines for major lenders, with Xsu acting as supervisor working on banking regulators.
Quarles ’successor will also have to deal with a regulatory draft for fintech companies that will quickly destroy the traditional financial sector.
The Fed is exploring how banks intersect with fintechs, particularly smaller lenders who may outsource more services and infrastructure. Fintechs is also lobbying the Fed to enter the payment system.
While other bank regulators have worked for years to get fintechs under their regulatory umbrellas, the Fed has resisted, fearing it could pose systemic risks. However, as the sector continues to grow, the Fed is expected to move.
“You hear a lot about fintech promises, but they also need to look carefully at the risks,” said Tim Clark, a former Fed official who now works with the Better Markets advocacy group.
On the relevant front, the Fed is currently studying the consequences of a central bank digital currency. With recent research by the Fed Council and the Federal Reserve Bank of Boston, the central bank is trying to weigh the risks and benefits of such a product, which will help it expand its use and speed up remittances.
Banks ’annual“ stress test ”of health checks could be the first part of the Kvarl change list that Democrats need to consider.
Kvarls sought to make the tests more transparent and predictable for banks, including canceling a “quality” appeal that allowed the Fed to circumvent creditors for subjective reasons. Democrats say the tests were much easier during the Quarles era.
Jaret Seiberg, an analyst at Cowen Washington Research Group, said in September that changes in the stress test could occur in 2023 and include directing banks to reserve not four but eight of the expected dividends and resuming qualitative appeal. wrote.
ADDITIONAL LEVEREDJ SHOW
Another issue on the table is the additional leverage ratio, a rule created after the crisis a decade ago that requires banks to retain capital in relation to assets regardless of their risk.
The Fed was forced to temporarily ease this rule during the pandemic as bank deposits and treasury bonds increased capital requirements, which were seen as safe assets.
Despite a strong banking lobby, the Fed allowed the relief to end in March, but promised to reconsider the general rule. The Fed has not yet announced the offer, leaving the job to Quarlz’s successor.
ACT ON REVESTMENT OF THE COMMUNITY
The central bank will also play an important role in the long-awaited revision of the Company’s reinvestment legislation, which encourages lending to low-income communities. The Fed, which has taken responsibility for writing the rules with other banking regulators, hopes the rules can be updated to reflect growth in online banking, while lenders make a significant contribution to the poorer regions they serve. provides
Attempts to update the rules under the Trump administration have been slow after regulators failed to agree on a way forward. (Interview by Pete Schroeder; Additional report by Andrea Shalal; Edited by Michelle Price, Andrea Ricci and Chizu Nomiyama)