The Federal Reserve’s top Wall Street watchdog, Michael Barr, and other bank regulators are set to defend their plans to increase U.S. bank capital requirements before Congress this week. With mounting pressure from lawmakers to rein in their efforts, Barr, along with Martin Gruenberg of the Federal Deposit Insurance Corporation and Mike Hsu, acting Comptroller of the Currency, will testify before the Senate Banking Committee on Tuesday at 10 a.m. ET and the House of Representatives Financial Services Committee on Wednesday at 9:30 a.m. ET.
This marks the officials’ first appearance on Capitol Hill since proposing the “Basel III Endgame” rules in July, providing insight into the Democrat-led committee’s stance on the issue. The proposed rules aim to overhaul how banks assess risk and determine capital requirements, with the goal of making the financial system safer following the failure of three banks earlier this year. However, banks have criticized the proposal, claiming it will negatively impact lending and the broader U.S. economy.
In prepared testimony, Barr emphasized the need for a strong regulatory framework to ensure resilience in the face of emerging risks. Meanwhile, 39 Senate Republicans have urged regulators to abandon the proposal, citing potential economic harm. Analysts and lobbyists will closely watch the testimony to gauge where more moderate Democrats stand on the issue, as their stance will influence the industry’s comments and the Fed’s response to those comments in final rulemaking.
Gruenberg may face questions regarding a report that female employees had left the FDIC due to a “toxic” culture and unpunished misconduct. The regulator has announced steps to address the issue, including an external review of its practices. Additionally, officials may be questioned about a recent ransomware attack on the U.S. arm of China’s largest lender, disrupting trades in the $26 trillion U.S. Treasury market.
Overall, the upcoming hearings are expected to offer crucial insights into the future of U.S. bank capital requirements and the potential impact on the financial industry.
Reporting by Michelle Price and Pete Schroeder; editing by Jonathan Oatis
