Federal Reserve Board (FRB) Chair Jerome H. (“Jay”) Powell said Wednesday he stands behind the Basel III endgame changes outlined Sept. 10 by the board’s vice chair for supervision and that he was involved in the negotiations for developing the process.
Powell made the remarks in a press conference following the announcement of actions by the Federal Open Market Committee’s (FOMC) decision to cut interest rates by 50 basis points.
Responding to a question from American Banker Reporter Kyle Campbell, Powell said he was “in alignment” with changes previewed by FRB Vice Chair Michael Barr.
“Those changes were negotiated between the agencies with my support and with my involvement,” the FRB chair said.
However, Powell said those changes will not be the final rule. He indicated that the agencies will “move as a group” to release for comment the changes outlined by Barr.
In remarks at the Brookings Institution in Washington, D.C., Sept. 10, Barr said the re-proposal on the Basel III endgame “brings us closer to completing the task” of improving capital requirements in the wake of the global financial crisis of 2008-09.
In his remarks Sept. 10, Barr said he would re-propose to the FRB the Basel endgame and G-SIB surcharge rules.
For the endgame re-proposal, Barr said banks with assets between $100 billion and $250 billion would no longer be subject to the endgame changes, other than the requirement to recognize unrealized gains and losses of their securities in regulatory capital.
“These changes reflect the feedback we have received from the public, improve the tiering of the proposal, and better reflect risks,” he said.
He said recommended changes to the G-SIB surcharge proposal would be made “to better align the capital surcharge for a G-SIB with its systemic risk profile.”
“The broad and material changes to both proposals that I’ve outlined today would better balance the benefits and costs of capital in light of comments received, and result in a capital framework that appropriately reflects the risks of bank activities and is tiered to the banking sector,” Barr said. “They also bring the proposals broadly in line with what other major jurisdictions are doing. And what does this all mean? A safer and fairer banking system. My goal, throughout my nearly 30 years in this field, has always been to help ensure that the banking system can support households and businesses of all types, during good times and bad.”
FRB Vice Chair for Supervision Michael S. Barr: The Next Steps on Capital