Federal Reserve Governors Michelle Bowman and Christopher Waller pose for a photo during a break at the Monetary Policy Conference at the Hoover Institution of Stanford University in Palo Alto, California, the United States, on May 6, 2022. June 6th.
Ann Safire | Reuters
early leave The appointment of the Federal Reserve’s top financial regulator to allow a more industry-friendly official to take his place is the latest boon for U.S. banks amid a wave of post-election optimism.
Fed Vice Chairman for Oversight Michael Barr Monday said he planned to Step down to leave office by next month to avoid a protracted legal battle with the Trump administration. weighing Seeking his removal from office.
This statement is contrary to Barr’s views previous After commenting on the matter, he ended his supervisory duties about 18 months earlier than planned. It also removes a possible obstacle to Trump’s deregulatory agenda.
Banks and other financial stocks are among them big winner The election of Donald Trump in November has led to speculation that regulations will ease and deal activity, including mergers, will increase. Weeks after Trump’s victory Selected Hedge fund manager Scott Bessent has been nominated as Treasury Secretary.
Trump has yet to nominate nominees for the three major bank 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 precise picture of bank regulation is taking shape.
Trump is limited to selecting one of the two Republican Fed governors to serve as vice chairman of oversight: Michelle Bowman or Christopher Waller.
Waller declined to comment, while Bowman did not immediately respond to a request for comment.
Bowman’s name has appeared on shortlists for possible roles in the Trump administration and is considered a front-runner. critic Barr seeks to force U.S. banks to hold more capital – a proposal known as Basel III endgame.
“The supervisory approach we took failed to consider or develop sound recommendations that were both consistent with the original Basel accord and appropriate to the specific circumstances of the U.S. banking system,” Bowman said in a November statement. speech.
Former community banker and Kansas Bank Commissioner Bowman may reportedly pursue “industry-friendly reforms” that target some of the banks’ pain points Alexandra Steinberg Barrageformer FDIC executive and Troutman Pepper Locke partner.
That includes what bank executives say is an opaque Fed stress test Ballage cited complex processes, long turnaround times for merger approvals and confidential bank reviews that bankers said were sometimes unfair.
An easier “Endgame”?
Speaking of the Basel endgame, first of all declare Before July 2023 soft The proposal was released last year, and it’s now more likely that its final form will be gentler on the industry as a whole, rather than a version that forces big banks to withhold tens of billions of dollars in capital.
Barr led the cross-agency effort to draft the sweeping Basel final accord, an initial version of which would have raised capital requirements for the world’s largest banks by about 19%. Now, Barrage and others are seeing a final version that’s far less onerous.
“Barr’s successor could still work with other agencies to propose new B3 Endgame rules, but we believe such a proposal would be capital-neutral across the industry,” Stifel analyst Brian Gardner said in a note on Monday. “Bowman By voting against the 2023 proposal, we expect she will lead a rewrite of B3 in a different direction. “
That would allow them to increase stock buybacks, among other possible uses for the money, if lenders ultimately resist efforts to force them to hold more capital.
Bank stocks rose on Monday after Barr’s announcement, with the KBW Bank Index rising 2.4% intraday. Citigroup and Morgan StanleyBoth companies made headlines last year due to regulatory concerns and were among the day’s biggest gainers, both up more than 2%.
It is worth noting that Klaros Group co-founder Brian Graham said that Barr did not resign as one of the seven Fed governors, which maintains the current 4-to-1 ratio of Democratic appointees on the Fed board. 3 advantages.
“It’s actually very smart for Barr to step down as vice chairman while retaining his position as governor,” Graham said. “It preserves the balance of power in board voting for about a year and limits the choice of his successor to those currently on the board. People who hold office.”
