Federal Reserve's new bank cop lays out regulatory agenda

The Federal Reserve’s top bank cop Michael Barr on Wednesday hinted that more stringent requirements for Wall Street and tougher oversight of cryptocurrency activity could be ahead, in his first public speech since being confirmed to the post.

Why it matters: Barr is the nation’s most powerful bank regulator whose actions could leave a notable imprint on the oversight of the financial system.

Details: Barr, officially known as the vice chair of the Federal Reserve, outlined his top priorities — a to-do list, of sorts — in a wide-ranging speech titled “Making the Financial System Safer and Fairer” at the Brookings Institution, a Washington-based think tank.

  • According to the prepared text, Barr said it will assess how the Fed considers banks’ proposed mergers and “where [the Fed] can do better” on the review of tie-ups.
  • Barr also mentioned that the Fed may “consider adjustments” to a slew of critical rules for large banks, including the annual stress tests they undergo and how much capital banks are required to hold on their balance sheets.

Of note: Barr’s predecessor, Randal Quarles, appointed by former President Trump, rolled back some regulatory requirements for big banks, including chipping away at the stress tests.

Between the lines: In what’s sure to catch the attention of the cryptocurrency industry, Barr also dedicated part of his speech to the rise in popularity of crypto assets.

  • “As innovative financial products develop and grow rapidly, excitement can outrun the proper assessment of risks,” Barr said.
  • Barr said the Fed plans to work with other 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.”
  • Barr also said privately-issued stablecoins could pose a risk to financial stability. “I believe Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter.”

Catch up quick: Barr is only the second person and first Democratic appointee to hold the job since its creation by the Dodd-Frank Act in 2010.

  • Barr, who served as an assistant secretary in the Treasury Department during the Obama administration, was a key architect of the law.

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