Sunday, March 26, 2023

New Fed banking chief targeting crypto and climate change as top priorities

President Joe Biden will nominate Michael Barr to be the Federal Reserve’s high regulator in control of large banks. Barr, who served as assistant Treasury secretary for monetary establishments throughout the Obama administration, seen right here at a Treasury Department assembly in Washington, D.C. on Nov. 30, 2010.

Andrew Harrer | Bloomberg | Getty Images

The Federal Reserve’s new banking regulator outlined a broad agenda in a speech Wednesday that pushed for motion on stablecoins, local weather change preparations and each the protection and equity of the finance business.

Fed Governor Michael Barr, whose title of vice chair for supervision offers him broad powers over the nation’s banks, gave his first coverage speech since being confirmed by the Senate.

Among his priorities: a push for Congress to enact complete regulation over stablecoins, or cryptocurrencies pegged to different belongings, usually currencies.

He additionally stated that subsequent 12 months the Fed will launch an train “to better assess the long-term, climate-related financial risks facing the largest institutions.”

And he stated a push for a system that isn’t solely financially sound but additionally honest, notably to these on the decrease finish of the earnings spectrum with much less entry to banking providers, could be a serious precedence.

“Fairness is fundamental to financial oversight, and I am committed to using the tools of regulation, supervision, and enforcement so that businesses and households have access to the services they need, the information necessary to make their financial decisions, and protection from unfair treatment,” Barr stated in a speech on the Brookings Institution in Washington, D.C.

Barr presides now over a monetary system that’s usually considered nicely capitalized however was nonetheless hit by market disruptions requiring Fed intervention within the early days of the Covid disaster. The rise of cryptocurrencies and stablecoins additionally has posed challenges for the Fed, which is exploring a possible digital forex of its personal.

He referred to as for elevated scrutiny of the crypto business and the dangers that it poses.

“Stablecoins, like other unregulated private money, could pose financial stability risks,” Barr stated. “I believe Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter.”

On local weather change, Barr waded into an space that has drawn criticism from some Republican congressional leaders who consider the Fed is overstepping its mandate.

Barr stated the Fed desires to grasp the dangers that local weather occasions pose to the system, whereas acknowledging that the central financial institution’s curiosity on the problem is “important, but narrow.”

Along with the Office of the Comptroller of the Currency and the FDIC, the Fed is working up methods it desires banks to “identify, measure, monitor, and manage the financial risks of climate change. In addition, we are considering how to develop and implement climate risk scenario analyses.”

On the equity challenge, Barr stated he desires a system that gives shoppers with entry to providers and data to guard them from abuse.

“As innovative financial products develop and grow rapidly, excitement can outrun the proper assessment of risk,” he stated. “As we have seen with the growth of crypto assets, in a rapidly rising and volatile market, participants may come to believe that they understand new products only to learn that they don’t, and then suffer significant losses.”

Barr stated he additionally will work to make sure that banks that take part in crypto-related endeavors have threat controls in place.

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