As the next Wall Street officer in the United States Fed, Michael Barr faces a lengthy to-do list

As the next Wall Street officer in the United States Fed, Michael Barr faces a lengthy to-do list ...

WASHINGTON, April 15 (Reuters) - President Joe Biden of the United States announced on Friday that he would nominate former Treasury official Michael Barr to replace Sarah Bloom Raskin, who died in March after failing to get support from moderate Democrats.

Barr, who is currently a professor at the University of Michigan, was a key figure in the Treasury when the Congress approved comprehensive reforms following the financial crisis in 2007-09.

If Barr receives Senate approval, here is Barr's regulatory agenda:

REDUX OF THE DE-REGULATION?

Randal Quarles, the previous Fed Vice President for Supervision, led a review of post-crisis regulations, arguing that they were too harsh and difficult to enforce. Democrats accused Quarles of saving Wall Street billions of dollars while reducing systemic hazards, and they want the Fed to revisit certain of those changes.

Some of the most litigious were changes to the "Volcker Rule" reducing speculative bank investments, eliminating a requirement for big banks to hold capital against certain swap transactions, and stripping the Federal Reserve of its ability to fail banks on their annual "stress tests."

Given that these modifications are likely to be controversial and time-consuming, Barr will have to select carefully which of the ones he believes he can reverse.

CLIMATE CHANGE RISKS

Climate change, a major policy goal for Democrats, is expected to be pushed back to the Federal Reserve's agenda rapidly.

So far, the Federal Reserve has asked lenders to explain how they are managing climate change-related problems to their balance sheets, implying that the industry intends to undertake a formal climate change scenario analysis in 2023.

These projects are expected to accelerate. The major issue will be whether the Federal Reserve is urging for large-scale capital restrictions on banks with significant exposures to pollution industries and other climate-specific hazards.

As Raskin's position was slammed by concerns she would push too aggressive on climate danger, Fed officials might end up treading more cautious than progressives expected.

M&A for the Bank of England

Under a new supervision chief, the Fed's position on bank M&A is expected to be tougher. Progressive Democrats are generally opposed to bank tie-ups, claiming that they reduce competition and hurt consumers, and many deals were delayed as Quarles stepped down from the role in October.

Following Fed Chairman Jerome Powell's resignation, some pending deals have been approved, but the industry is still waiting for the Fed and the Justice Department to decide on a possible new approach for bank agreements. Barr, if confirmed, is expected to lead the committee who is looking into possible tie-ups.

FINTECH FRAMEWORK

The Federal Reserve is also considering a regulatory blueprint for "fintech" companies that are rapidly chipping away from the traditional financial industry.

It's working on how banks interact with fintech companies, mainly with smaller businesses that may extrapolate more services and infrastructure. Fintechs are also lobbying the Federal Reserve for access to its payment system.

While other banking regulators have worked tirelessly to include fintechs under their regulatory umbrella, the Fed has resisted, fearing that doing so might result in systemic risks. However, the Fed is planning to act as the sector expands.

RATIO FOR SUPPLEMENTARY LEVERAGE

Another issue on the table is the supplementary leverage ratio, a measure developed after the decade-ago crisis that requires banks to hold capital regardless of their risk.

In the midst of the epidemic, the Fed stowed out temporarily a rule that was not found by a surge of bank deposits and Treasury bonds. Financial capital requirements for safe assets were also pushed up.

Despite intense bank lobbying, the Fed allowed that relief to expire, but promised to review the overall rule. The Fed has yet to publish a recommendation.

COMMUNAUTITY REINVESTMENT ACT

The central bank will also play a key role in a long-awaited overhaul of the Community Reinvestment Act (CRA) guidelines, which promote lending in low-income communities.

The Federal Reserve, which has previously responsibilities for drafting the rules with other bank regulators, hopes the CRA may be updated in order to reflect the rise in online banking, while simultaneously ensuring lenders make significant contributions to the vulnerable areas they serve.

Barr would likely have to be in place before the Federal Reserve may sign off on the changes.

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