Federal Reserve Board President Michelle Bowman and Christopher Waller pose for a photo during a break from a conference on monetary policy at the Hoover Institution at Stanford University on May 6, 2022 in Palo Alto, California, USA. The photo was taken on May 6, 2022.
Ann Safir | Reuters
The early departure of the Fed’s top financial regulator allows a more industry-friendly official to take his place, the latest boon for U.S. banks riding a wave of post-election optimism. There is.
Federal Reserve Vice Chairman Michael Barr said Monday he will resign from his post by next month to avoid a lengthy legal battle with the Trump administration, which has been considering calling for his removal from office. He said it was planned.
The announcement is a complete departure from Barr’s previous comments on the matter, and will end his tenure as director about 18 months earlier than planned. It would also remove a potential obstacle to President Trump’s deregulatory agenda.
After the election of President Donald Trump in November, banks and other financial stocks rose sharply on expectations of increased trading activity, including deregulation and mergers. Weeks after his victory, Trump selected hedge fund manager Scott Bessent as his nominee for Treasury secretary.
President Trump has not yet nominated candidates for the three major banking regulators: the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.
Now, with Barr’s resignation, a more accurate picture of future banking regulation is being formed.
President Trump is limited to nominating one of two Republican Fed directors, Michelle Bowman and Christopher Waller, to serve as vice chairman of the Fed.
Waller declined to comment, while Bowman did not immediately respond to a request for comment.
Mr. Bowman has already been named to the Trump administration’s shortlist for the position and is considered a front-runner, but he is not a candidate for Mr. Barr’s efforts to force U.S. banks to hold more capital. III (known as “Endgame”).
“The regulatory approach that we have taken is consistent with the original Basel Accord, but with the goal of considering and submitting reasonable proposals that fit the specifics of the U.S. banking system,” Bowman said in a November speech. “I couldn’t do anything about it,” he said.
Alexandra Steinberg Burrage, a former FDIC executive and partner at Troutman Pepper Rock, said Bowman, a former community banker and Kansas state bank commissioner, is pushing for “industry-friendly reforms” that address many of the banks’ sore spots. It is said that there is a possibility of working on “.
Barrage said these include what bank executives call an opaque Fed stress testing process, long turnaround times for merger approvals, and what bank officials sometimes say are unfair and confidential bank examinations. He said that this includes those who do.
Is “Endgame” easier?
As for the Basel final stage, which was first announced in July 2023 before the toned-down proposals were announced last year, its final form is far more industry-friendly compared to the version forced on big banks. There is now a growing possibility that this will become a reality. We reserve tens of billions of dollars in capital.
Barr led an interagency effort to draft a comprehensive Basel Endgame, an early version of which would have increased capital requirements for the world’s largest banks by about 19%. . Now Barrage and his colleagues are seeing a final version that is far less burdensome.
“Mr. Barr’s successor may work with other government agencies to propose new B3 endgame rules; “We believe it will be capital neutral across the industry.” “Mr. Bowman voted against the 2023 proposal, and we expect her to take the B3 rewrite in a different direction.”
If lenders can finally thwart efforts to force a capital increase, it could increase share buybacks among other possible uses for the funds.
Bank stocks rose on Monday following Barr’s announcement, with the KBW Bank Index rising as much as 2.4% during trading. Citigroup and Morgan Stanley, which made headlines last year for regulatory issues, were among the day’s biggest gainers, each rising more than 2%.
Notably, Barr has not resigned from his role as one of the seven Fed board members, making it the most Democratic board member on the Fed’s board, according to Claros Group co-founder Brian Graham. The current 4-3 advantage in appointees will be maintained, it said.
“Mr. Barr’s decision to resign as vice chairman while remaining governor is very wise,” Graham said. “This will maintain the balance of power in board voting for about a year and limit his options to replace him to those currently serving on the board.”
