Pressed by House lawmakers, Federal Reserve Vice Chairman for Supervision Michael Barr today declined to commit to reproposing the Basel III endgame capital rules if there are substantial changes to the proposal before it is finalized. Barr and FDIC and OCC top officials appeared before the House Financial Services Committee for the first of two days of congressional oversight hearings. Most of the hearing focused on a recent report finding widespread sexual harassment and discrimination at the FDIC, but lawmakers also questioned regulators on the capital proposal, with committee members concerned about its economic impacts should it go into effect.
“This proposal will severely reduce financing and access to capital for small businesses, making it harder for them to secure funding to hire workers, maintain their operations and expand operations,” Rep. Roger Williams (R-Texas) said. “This could result in a domino effect, stifling economic growth in local communities where these banks are often a driver of entrepreneurship.”
Barr and other Fed officials have previously said that broad and substantial changes will be made to the Basel proposal in response to the public comments received about it. However, Barr was questioned by lawmakers on whether the Fed would repropose it, which would subject the proposal to a second round of public comment and review. Barr didn’t commit to any course of action. “We haven’t made a decision on process yet,” he said. “We’re really focused right now on getting the substance right.”
Also during the hearing, Rep. Brad Sherman (D-Calif.) asked Barr about potential changes to the Fed discount window and whether the agency is looking at requiring some banks using the program to post collateral equivalent to a large percentage of their uninsured deposits, as reported by the Wall Street Journal last month. Again, the vice chairman was noncommittal about a course of action. “We’re working through the substance of that now,” Barr said. “We are looking at a range of measures to make sure that banks are ready to use the discount window.”
Lawmaker shares concern about Reg II proposal’s effect on banking access
Lowering the cap on debit card interchange fees will hinder a bank’s ability to offer low- and no-cost bank accounts to low- and moderate-income Americans, Rep. David Scott (D-Ga.) said. Scott questioned Barr on the Fed’s proposal to revise Regulation II to lower the cap. Barr didn’t commit to any course of action, saying the agency is still reviewing public comments.
Scott also asked Barr whether the Fed shares concerns expressed by banks about the effects of lowering the cap on their ability to offer low- and no-cost bank accounts. Again, Barr said the agency is still reviewing comments. “I don’t have an answer to your question yet, but those are the kinds of comments we’ll take quite seriously,” Barr said.
