United States: FRB Vice Chair Summarizes Supervisory And Regulatory Policy

Board of Governors of the Federal Reserve System ("FRB") Vice Chair for Supervision Randal K. Quarles outlined the agency's efforts to improve the efficiency, transparency and simplicity of its regulatory framework.

In testimony before the Committee on Financial Services, Mr. Quarles stated that the U.S. banking system is in significantly improved condition, and that the FRB should now seek to reduce regulatory burdens. As previously covered, the FRB issued a proposal to recalibrate the enhanced supplementary leverage ratio in order to reduce the burden for global systemically important bank holding companies ("G-SIBs"). Mr. Quarles encouraged policymakers and regulators to ensure that the restrictions implemented on an entity match the risk of its activities. In accordance with this recommendation, Mr. Quarles urged for (i) different liquidity requirements for non-G-SIBS and G-SIBS, and (ii) reduced information requirements for living wills.

Mr. Quarles asserted that transparency is crucial, especially for monetary policy. Last year, the FRB requested comments on several proposals to enhance the transparency of stress-testing procedures, and Mr. Quarles affirmed that the FRB is continuing efforts to make stress testing more transparent. Mr. Quarles applauded recent efforts by the Basel Committee on Banking Supervision in regard to its international standard setting.

According to Mr. Quarles, the FRB is continuing to simplify its "complex post-crisis regulatory framework." In this regard, Mr. Quarles noted significant criticisms of the complexity, burdens and scope of the Volcker Rule coming from both the industry and regulators. Mr. Quarles confirmed that regulators are working to "further tailor implementation of the Volcker Rule," and to reduce the burden for firms that do not have large trading operations or engage in activities that lead to proprietary trading.

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