The US Federal Reserve is open to easing some banking regulations put in place after the 2008 financial crisis, including stress tests and the so-called Volcker Rule, one central bank governor said.
In testimony to be delivered yesterday, US Federal Reserve Governor Jerome Powell said some reasonable reforms could be in order.
However, he argued that reforms made since the crisis had left the US banking sector in better condition than it was before the meltdown.
The central bank should consider adjusting regulations “in common-sense ways that will simplify rules and reduce unnecessary regulatory burden without compromising safety and soundness,” Powell said in prepared remarks released on Wednesday.
The testimony comes as the administration of US President Donald Trump prepares to modify much of the regulation included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in response to the crisis.
The Fed was yesterday also scheduled to publish the results of annual stress tests for major banks, which are called for under Dodd-Frank and intended to make sure lenders are on solid capital footing in the event of a crisis.
The financial industry, and mid-size banks in particular, have complained of the burden the new regulations place on lenders.
The Fed would support raising the threshold for the stress test requirement, applying it to banks with US$50 billion or more in assets, compared with the current US$10 billion.
The central bank could likewise exempt smaller banks from the Volcker Rule, which restricts certain speculative and risky trades made with a bank’s own assets, Powell said.
“There is little doubt that the US financial system is stronger today than it was a decade ago,” Powell said in testimony to be delivered before the US Senate Committee on Banking, Housing and Urban Affairs. “We must also be vigilant against new risks that may develop.”
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