Federal Reserve Regulators Ease Some Post-Great Recession Controls
Thu Mar 07 2019
Lucy Harlow (3509 articles)

Federal Reserve Regulators Ease Some Post-Great Recession Controls

Banking regulators are easing some controls that went into place after the Great Recession.

The Federal Reserve decided to end some of the public pass-fail grades it gave big banks after their annual stress tests, which came about as part of the 2010 Dodd-Frank legislation. Banks have to report how they would perform under various what-if economic scenarios.

Banks will not receive public grades if they had taken the tests for four years and passed in the most recent year. A bank could fail in 2019 and yet still avoid a public grade if it had passed in 2018.

The Fed also voted against ordering banks to hold extra capital in case of a future downturn.

Another bank regulatory body, the Financial Stability Oversight Council that is led by Treasury Secretary Steven Mnuchin, shifted attention from individual nonbank financial firms to market-wide risks, according to the Office of the Comptroller of the Currency. The FSOC oversees such businesses as insurance companies or asset managers. Insurance company AIG was an example of a nonbank financial firm that was tied in with the tumult of the 2008 crash and which needed a massive federal bailout.

At the same time, regulators are discussing whether big banks should defer some executive compensation and claw back more bonuses if losses mount, according to a Wall Street Journal report. Required by Dodd-Frank, the issue has largely been ignored by regulators. Banks are supporting the move, assuming the rules will be easier than if a Democrat wins the presidency in 2020.

But, according to Reuters, the Fed may tighten some rules on foreign banks that have been able to use a loophole to keep billions in assets from some U.S. bank regulations.

Lucy Harlow

Lucy Harlow

Lucy Harlow is a senior Correspondent who has been reporting about Commodities, Currencies, Bonds etc across the globe for last 10 years. She reports from New York and tracks daily movement of various indices across the Globe

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