Fed’s Barr speaks at fireside chat, underscores the importance of public comment

Bank Regulatory Federal Issues Federal Reserve CRA Basel Capital Requirements Bank Supervision

On January 9, Fed Vice Chair of Supervision Michael S. Barr delivered remarks at an event held by Women in Housing and Finance, during which he discussed consumer credit, bank supervision, DEI issues, capital issues, bank regulation and more. Barr began by addressing current risks that the Fed is focused on mitigating, which included efforts surrounding the Community Reinvestment Act final rule and the Basel III Endgame proposal. The Fed, he said, has been receiving many comments on the proposal, which will help ensure the “balance” is right on the final capital rule. There is one more week before the comment period closes, he added.

Barr also discussed the second quantitative impact study the Fed is conducting to ensure accuracy and help shape the final version of the Basel III proposal. He noted that the Fed conducted the first study a “few years ago” to inform the first proposal. He mentioned that the Fed is collecting information and will be publishing their aggregated analysis for public comment.  Barr also discussed comments considering whether the Fed should adjust for historical losses based on particular firms, or if there should be standardized accountability for all risk.

In response to questions from the moderator, Barr opined that the capital rules in the Basel III proposal would have a modest impact on the affordability and accessibility of mortgage credit and consumer credit. He conceded that the proposal’s impact would create higher costs, but that the impacts on consumers would be “very very small.” Barr also invited commenters to inform the Fed about the impacts. On international competition, Barr also noted that the higher capital standards would not detrimentally impact the U.S. banking system.

When asked about the Fed’s Bank Term Funding Program, made available by the Fed, FDIC, and Treasury last spring, Barr said banks and credit unions are still leveraging the program today. He explained that the “program was really designed in that emergency situation … to make sure that banks[,] and creditors of banks[,] and depositors [in] banks understand that banks have the liquidity they need.”