Fed Nominee Quarles ‘Fully Supports’ Tailored Regulation

During his confirmation hearing today, Randal Quarles — President Trump’s nominee to serve as Federal Reserve vice chairman for supervision — endorsed the concept of tailored supervision that the American Bankers Association has done much to work into the policy conversation over the past several years. “It makes for better and more efficient regulation,” he said, which in turn “makes it easier for the financial system to support the real economy.” He said he look at tailoring capital requirements as well as other regulations.

Quarles also called for more transparency in the Dodd-Frank Act-mandated stress testing and capital planning processes. “I would want that to be a theme of the Federal Reserve’s regulatory activity were I confirmed for this position,” he said. “An example is the lack of transparency that has surrounded the CCAR stress tests up to now — so I do think the Federal Reserve can look at being more transparent about those activities and can do it in a way that does not in any way reduce the effectiveness.”

Trump’s nominee for comptroller of the currency, former OneWest Bank CEO Joseph Otting, also testified today. He called for the OCC to do more to enhance access to credit for low-income and minority communities, expressing concern that excessively prescriptive and narrow government rules have artificially limited bank services to these customers, citing small-dollar loans as an example.

Both Otting and Quarles expressed concern about rising risks in student loans and the auto loan market, which Otting said “got a little overcooked” before lenders began reining things in. Quarles also said he was worried about the growing complexity of the regulatory system posing risks in itself. The Senate Banking Committee is expected to vote on the Quarles and Otting nominations after the August recess.