Fed Chairman Wants Regulation Efficiency, Not Relaxation

Federal Reserve Vice Chairman for Supervision Randal Quarles says that any worries that the agency is looking to relax rules or even reduce capital levels is simply unfounded.

“It’s not just semantically that I want to stress this: As we are looking at enhancing the efficiency of regulation, we are not looking to relax regulation,” said Quarles, who was appointed by President Donald Trump. “We are not looking to significantly reduce the level of risk-weighted capital in the [banking] system. That has been a strength … a global competitive advantage, relative to the capital levels of non-U.S. competitive institutions.”

According to American Banker, the remarks were made during a conference sponsored by the National Association for Business Economists. Quarles stressed that any current or future proposals will work to improve the efficiency of the agency’s regulations.

“We’re not looking to reduce capital, or really, I don’t view our objective as relaxing regulation,” he said. “We’re looking to achieve regulatory objectives in the most efficient way, and it would be the first time in the history of man since the expulsion from the Garden [of Eden] that a project like this [Dodd-Frank] has been undertaken that could not be improved and made more efficient.”

The agency is currently reviewing the supplementary leverage ratio and Volcker Rule, as well as the transparency of the Fed’s stress testing models.

“I think there will be calibrations … calibrations to the supplementary leverage ratio, we’ll certainly look at that. The leverage ratio should be a backstop, not a predominant feature,” Quarles said. “I think … there are Volcker Rule recalibrations over the next several months, which, again, is an area where I think we can make regulation much more efficient without in any way undermining its statutory mandate.”

And while speaking about the future of the nation’s economy, Quarles believes that the investments made as a result of last year’s tax bill could boost productivity, and as a result, provide long-term growth.

“The sustainability of the recent upturn in growth will depend importantly on whether some of the factors that have been holding back growth for the past decade diminish, including weak investment and productivity,” he said. “On balance, I am cautious, but I am also optimistic enough to believe that the factors that have been holding back growth need not be permanent and could turn, even fairly rapidly.”