The Federal Reserve will be seen before signaling plans to raise interest rates in March as it focuses on fighting inflation in Washington, D.C. on January 26, 2022.
Joshua Roberts | Reuters
The Federal Reserve is taking another step towards relaxing regulations on large financial institutions, and this time it has changed the definition of “goodly managed” banks.
Under the proposal proposed for comments on Thursday, the Fed will allow banks with one “slack” rating to be considered still well managed. The assessment is carried out across three criteria: capital, liquidity, governance and control.
According to rules released in 2018, the defect prevents banks from meeting management standards, which prevents certain activities such as acquisitions.
“As such, this proposal would provide greater awareness of the overall conditions of the company in determining a properly managed position,” Michelle Bowman’s vice-chairman for oversight, said in a statement. “By addressing this discrepancy between valuation and the overall state of the company, the proposal adopts a practical approach to determining whether a company is being managed properly.”
However, the move was immediately rebuked by Bowman’s predecessor, Michael Burr.
“The current proposals will fundamentally change the well-managed, long-standing concept and pose a great deal of risk to the banking system,” Burr said in a statement.
Gov. Adriana Coogler also signaled concerns about the move, saying that while there are issues with the current system, the new plan “has a risk of going too far in other directions.”
The proposal comes just weeks after the Fed approved new capital rules for major banks, which also sparked objections from Barr and Kugler.
