President Joe Biden will nominate Michael Barr as the Federal Reserve’s top regulator in charge of big banks. Barr, who served as assistant Treasury secretary for financial institutions during the Obama administration, is seen here at a Treasury Department meeting in Washington, DC on November 30, 2010.
Andrew Harrer | Bloomberg | Getty Images
The Federal Reserve’s new banking regulator outlined a broad agenda in a speech Wednesday that urged action on stable currencies, climate change preparedness and the safety and fairness of the finance industry.
Fed Governor Michael Barr, whose title of vice chairman for supervision gives him broad powers over the nation’s banks, gave his first policy speech since being confirmed by the Senate.
Among his priorities: a push for Congress to pass sweeping regulations on stablecoins, or cryptocurrencies tied to other assets, often currencies.
He also said that next year the Fed will launch an exercise “to better assess the long-term climate-related financial risks facing larger institutions.”
And he said a push for a system that is not only financially sound but fair, especially for those at the lower end of the income spectrum with less access to banking services, would be a top priority.
“Fairness is central to financial oversight and I am committed to using the tools of regulation, oversight and enforcement so that businesses and households have access to the services they need, the information they need to make their financial decisions and protection from unfair. ,” Barr said in a speech at the Brookings Institution in Washington, DC
Barr now presides over a financial system that is generally thought to be well-capitalized but was still hit by market disruptions that required Fed intervention in the early days of the Covid crisis. The rise of cryptocurrencies and stablecoins has also presented challenges for the Fed, which is exploring a possible digital currency.
He called for increased scrutiny of the crypto industry and the risks it poses.
“Stablecoins, like other unregulated private money, can pose financial stability risks,” Barr said. “I believe Congress must work swiftly to pass much-needed legislation to bring stablecoins, especially those designed to serve as a means of payment, within prudent regulatory perimeters.”
On climate change, Barr waded into an area that has drawn criticism from some Republican congressional leaders who believe the Fed is overstepping its mandate.
Barr said the Fed wants to understand the risks that climate events pose to the system, while acknowledging that the central bank’s interest in the issue is “significant but narrow.”
Together with the Office of the Comptroller of the Currency and the FDIC, the Fed is working on ways it wants banks to “identify, measure, monitor and manage the financial risks of climate change. In addition, we are considering how to develop and implement analyzes of climate risk scenarios.”
On the issue of fairness, Barr said he wants a system that provides consumers with access to services and information to protect them from abuse.
“As innovative financial products are developed and scaled rapidly, excitement can exceed proper assessment of risk,” he said. “As we’ve seen with the rise of crypto assets, in a rapidly growing and volatile market, participants can come to believe they understand new products only to learn they don’t, and then suffer losses significantly.”
Barr said he will also work to ensure that banks participating in cryptography-related efforts have risk controls in place.
