Fed’s New Vice Chair Michael Barr Drafts Regulatory Agenda

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About six weeks into his new role as Federal Reserve Vice Chair for Supervision, Michael Barr’s first speech focused on safety and fairness as he hinted at tougher oversight of cryptocurrency, bank mergers and climate change. 

“Safety and fairness may seem like distinct goals, but they are intertwined. Financial instability unfairly harms those who are economically vulnerable, so making the financial system safer is making it fairer,” he said in his speech on Wednesday (Sept. 7) at the Brookings Institution in Washington, D.C.

Barr is the second most powerful banking regulator in the U.S. and has broad authority over the country’s financial institutions.

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Barr’s confirmation in July gave the central bank a full seven-member board for the first time in nearly a decade, PYMNTS reported. Among his duties is to develop a vision for how big banks and other finances will be regulated and review how regulators assess big bank mergers.

“Fairness is fundamental to financial oversight, and I am committed to using the tools of regulation, supervision, and enforcement so that businesses and households have access to the services they need, the information necessary to make their financial decisions and protection from unfair treatment,” Barr said in the speech. 

Climate change is also on Barr’s agenda, as “banks are increasingly focused on the risks that climate change brings to their balance sheets.”  

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Barr said climate change is an area that the Federal Reserve is “working to understand” in relation to the risks posed to individual financial institutions and the overall financial system. 

“In the near term, we intend to work with the Office of the Comptroller of the Currency (OCC) and the FDIC to provide guidance to large banks on how we expect them to identify, measure, monitor, and manage the financial risks of climate change,” he said in the speech.  

The Fed plans to launch a pilot “micro-prudential scenario analysis exercise” next year that will offer an improved assessment of the “long-term, climate-related financial risks facing the largest institutions.”

As far as cryptocurrency, Barr is calling for further examinations of the industry’s risks and plans to coordinate with other bank regulatory agencies to ensure that “crypto activity inside banks is well regulated, based on the principle of ‘same risk, same activity, same regulation,’ regardless of the technology used for the activity.  

“Crypto-asset related activity, both outside and inside supervised banks, requires oversight so that people are fully aware of the risks they face,” Barr said.