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October 8, 2021

The Agenda for the Next Fed Vice Chair for Supervision: Re-Regulate the Banks

FOR IMMEDIATE RELEASE
Friday, October 8, 2021
Contact: Doug Walker at 202-618-6430 or dwalker@bettermarkets.org

WASHINGTON, D.C.—Phillip Basil, Better Markets Director of Banking Policy, released the following statement on a new report, The Agenda for the Fed’s Next Vice Chair for Supervision:

“When the term of Federal Reserve Vice Chair for Supervision Randal Quarles expires on October 13, President Biden will have a tremendous opportunity to appoint a new Vice Chair for Supervision who will try not only to undo the dangerous deregulatory agenda, implemented with the support of Chair Jay Powell, but also set a foundation for the future of supervision and regulation in the U.S.

“The role of Vice Chair for Supervision has had significant influence over the supervision and regulation of the U.S. banking system, a fact that is all the more important considering the upcoming Chair nomination. The next Vice Chair for Supervision must pursue an agenda of “re-regulating” the banking system and promoting a safer and fairer financial system that better serves all Americans.

“Among the most important items – capital and liquidity requirements must be re-strengthened to reduce the possibility of failure of large banks under stress; living will submissions must return to their original frequency, and the process should be strengthened, to ensure the largest banks are more resolvable in the event they do fail; and the proprietary trading and investment restrictions of the Volcker Rule must be reinstated if not made broader and stronger.

“Supervision must regain its assertiveness. This should include restoring usage of supervisory-based restrictions on dividends and share buybacks (the so-called “qualitative objection”) when banks are found to have dangerously bad practices. But it should also expand on supervisory authorities to make bank boards more accountable and – importantly – to assess banks’ ability to identify, size, and manage emerging risks, including those stemming from climate change.

“Additionally, the VC Supervision must work to achieve greater equity in our banking system for low-income communities and communities of color. This is more than simply the right thing to do. It would help millions of people that are almost systematically poorly served by the financial services industry, and support a stronger economy.

“The next VC Supervision must also carefully consider the new and emerging risks as well as any potential benefits from the changing financial system landscape. The right set of actions would set us back on the path of trying to address the too-big-to-fail problem, help achieve greater resiliency in our financial system, and promote an economy that works better for all Americans.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.

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