Financial Regulators Testify on the Hill
November 21, 2022.
The Senate Banking and House Financial Services Committees heard from the top financial regulators last week:
- Michael Barr, Vice Chairman of Supervision, Federal Reserve
- Martin Gruenberg, Acting Chairman, Federal Deposit Insurance Corporation (FDIC)
- Todd Harper, Chairman, National Credit Union Administration (NCUA)
- Michael Hsu, Acting Comptroller of the Currency, Office of the Comptroller of the Currency (OCC)
Why it matters: In addition to addressing cryptocurrency, digital assets, and the recent FTX debacle, policymakers engaged the regulators on bank capital requirements. Republicans in the House and Senate stated that the banks are in a strong capital position and that any additional burdens would be unwelcome during current economic difficulties.
What they’re saying: Fed Vice-Chair Barr asserted that despite high bank capital levels, loan losses are rising and regulators are closely watching the CRE and residential housing sectors. He also shared that “strong” does not necessarily mean “strong enough.”
What’s next: the Fed will release a holistic capital framework review early next year, to include review of the supplementary leverage ratio, countercyclical capital buffer, stress testing, and G-SIB surcharges. He emphasized that any significant potential changes would be subject to notice and comment.
One fun thing: Regulators emphasized that they would focus only on financial institutions’ ability to measure and manage climate risk, and would not dictate capital allocation policies.