FRB Undertaking Review under Quarles’ Leadership, Seeks ‘Tailoring’ of Large-Bank Rules

On Friday, January 19th, Federal Reserve Vice Chairman for Supervision Randal Quarles announced that the Federal Reserve Board (FRB) intends to recalibrate the regulatory regime for banks, including revisions to capital and liquidity rules, according to an article by the American Banker.

Specifically, Quarles noted the FRB was undertaking a review of its current regulatory structure for the leverage ratio, which has been a consistent focus for the industry and the Trump administration. "Leverage ratio recalibration is also among the Federal Reserve's highest-priority, near-term initiatives," Quarles said. "We have made considerable progress on that front in the past few months, and I expect that you will see a proposal on this topic relatively soon."

Quarles added that revising many of the capital and liquidity rules for banks with more than $250 billion in assets, but that have not be designated as Global Systemically Important Banks, should be aimed at keeping rules in sync with the systemic risk that those firms pose.

Quarles said he has also directed staff to conduct a "comprehensive review" of regulations related to capital, liquidity, stress testing, and resolution planning in order to "consider the effect of those regulatory frameworks on resiliency and resolvability of the financial system" but also "more broadly to evaluate their costs and benefits."

However, Quarles did note that the agency does "intend to implement" the proposed Net Stable Funding Ratio, though he stressed that the FRB will "take into account and carefully consider … a number of serious, thoughtful comments" on the proposed rule. He did not offer a timetable on implementation of the Basel Committee's recently completed standards for a fundamental review of the trading book.

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