In his first appearance before Congress as head of the Federal Reserve, Chairman Kevin Warsh stressed the need for tailored bank regulation and said that while international coordination of banking standards is important, “the Basel endgame is not America’s endgame.”
Warsh appeared before the House Financial Services Committee today for the first of two days of testimony before lawmakers. In his opening remarks, the chairman said the Fed’s top objective is “to get monetary policy right,” which is why he formed five task forces to review various aspects of how the central bank sets policy.
“If we get policy right — and we will — the inflation surge of the last five years will be a thing of the past,” he said.
Warsh was questioned by committee members on a range of subjects, such as whether the Fed would meet its statutory mandate to promulgate rulemaking to implement the Genius Act by Saturday, which marks the first anniversary of the stablecoin bill being signed into law. The chairman said the central bank was “racing” to meet the deadline.
On bank regulation, Warsh said one of the strengths of the U.S. economy was its “highly competitive, diversified banking system,” which must be supported by tailored regulation that fits institutions and the customers they serve. While the chairman said he is still reviewing proposed capital standards to implement the Basel III endgame, he believes the U.S. must set standards that best fit its economy.
“I am all for international coordination of banking standards. It is a useful effort that we meet in Basel (Switzerland) to come to some sort of international standards,” Warsh said. “But the Basel endgame is not America’s endgame, that is not the Federal Reserve’s endgame. Our endgame is ensuring that we have the right rules that befit our economy, so we have a safe, sound and competitive banking system, and anything we agree on with international counterparts has to be in service to the economy.”
Warsh was also asked about opening payment system access to financial technology firms and other nonbanks, such as a current Fed proposal to create “skinny” master accounts for payment services. He didn’t weigh in on whether he would support the proposal but said new technologies are providing “huge opportunities” for the U.S.
“The United States can lead in payments,” he said. “Our economy can be the strongest in the world and improve its growth rate, but it is not without risks, and we at the Fed are going to strike the right balance in the challenges and the opportunities in payments and more broadly.”
