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Federal Reserve’s new bank cop lays out regulatory agenda

The Federal Reserve’s top bank cop Michael Barr on Wednesday hinted that more stringent requirements for Wall Street and tougher oversight of cryptocurrency activity could possibly be ahead, in his first public speech since being confirmed to the post.

Why it matters: Barr may be the nation’s most effective bank regulator whose actions could leave a notable imprint on the oversight of the economic climate.

Details: Barr, officially referred to as the vice chair of the Federal Reserve, outlined his top priorities a to-do list, of sorts in a wide-ranging speech titled “Making the ECONOMIC CLIMATE Safer and Fairer” at the Brookings Institution, a Washington-based think tank.

  • Based on the prepared text, Barr said it’ll assess the way the Fed considers banks’ proposed mergers and “where [the Fed] can perform better” on the overview of tie-ups.
  • Barr also mentioned that the Fed may “consider adjustments” to a slew of critical rules for large banks, like the annual stress tests they undergo and just how much capital banks must hang on their balance sheets.

Of note: Barr’s predecessor, Randal Quarles, appointed by former President Trump, rolled back some regulatory requirements for big banks, including chipping away at the strain tests.

Between your lines: In what’s sure to appeal to the cryptocurrency industry, Barr also dedicated section of his speech to the rise in popularity of crypto assets.

  • “As innovative financial loans develop and grow rapidly, excitement can outrun the correct assessment of risks,” Barr said.
  • Barr said the Fed plans to utilize other regulatory agencies to “make sure that crypto activity inside banks is well regulated, in line with the principle of same risk, same activity, same regulation, whatever the technology useful for the experience.”
  • Barr also said privately-issued stablecoins could pose a risk to financial stability. “I really believe Congress should work expeditiously to pass much-needed legislation to create stablecoins, particularly those made to serve as a way of payment, in the prudential regulatory perimeter.”

Barr said the central bank planned to launch a pilot test next year that could help the Fed examine the risks climate change poses to banks.

  • Barr also intends to utilize other regulators to provide large banks help with how exactly to “identify, measure, monitor and manage” the financial risks of climate change.
  • The Fed has been more vocal about climate change recently since it seeks to raised understand the ways that climate change threatens the economic climate and the economy.

The background: Barr is the next person and first Democratic appointee to carry the work since its creation by the Dodd-Frank Act in 2010.

  • Barr, who served being an assistant secretary in the Treasury Department through the National government, was an integral architect of regulations.

Editor’s note: This story has been updated with new details

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