Inflation has soared to 8.3%, near a 40-year high, with the cost of items like food, gas and airline tickets having skyrocketed from 12 months earlier. The Fed is facing the difficult and high-risk task of curbing high inflation by sharply increasing interest rates without causing a recession. Widespread doubts about its ability to achieve that goal have helped send the stock market plunging.

Barr, who was a top Treasury Department official during the Obama administration, helped design the 2010 Dodd-Frank financial regulations after the devastating 2008 financial crisis. He is now the dean of the University of Michigan’s Gerald R. Ford School of Public Policy.

If approved by the committee and confirmed by the full Senate, Barr would join the Fed’s Board of Governors as the vice chair for supervision, a position created by the Dodd-Frank legislation. As one of seven members of the board, Barr would also have a permanent vote on interest rate decisions at each of the Fed’s eight policy meetings each year.

There has been only one other vice chair for supervision, Randal Quarles, whose term ended in January. Quarles drove several changes to financial regulation during his term that drew criticism from progressives, including Sen. Elizabeth Warren, a Democrat from Massachusetts. They argued that, among other moves, Quarles took steps that reduced the capital that banks are required to hold to ensure they remain solvent. Still, the banks overall emerged from the COVID pandemic in solid financial shape.

Warren has already endorsed Barr, a Rhodes Scholar who clerked for Justice David Souter on the Supreme Court. He also served during the Clinton administration at the White House, the Treasury Department and the State Department.

Biden chose Barr after his first pick, Sarah Bloom Raskin, ran into a wall of opposition from Senate Republicans and from West Virginia Democratic Sen. Joe Manchin. They argued that she would go too far to weigh the impact of climate change as part of the Fed’s regulatory authority and possibly discourage banks from lending to oil, gas, and coal companies.

This week, Manchin endorsed Barr and said the two had met and discussed “American energy security.”

Barr’s hearing comes after the Senate has approved several other nominees to the board, giving Biden a chance to put a Democratic stamp on the Fed. The Senate last week confirmed Jerome Powell to a second four-year term as Fed chair, and late last month approved Lael Brainard for the No. 2 position of vice chair.

This month, the Senate also confirmed Lisa Cook, an economics professor at Michigan State University, and Philip Jefferson, an economist at Davidson College, to the Fed’s board.

The House Committee on Financial Services on May 17 voted to approve an amended version of H.R.7022 – the Strengthening Cybersecurity for the Financial Sector Act of 2022 – and send the bill to the full House of Representatives for consideration.

The legislation aims to amend the “Federal Credit Union Act to modify requirements relating to the regulation and examination of credit union organizations and service providers.”

According to its sponsor Rep. Bill Foster, D-Ill., the bill “would grant the National Credit Union Administration (NCUA) and the Federal Housing Finance Agency (FHFA) the authority to oversee third party vendors employed by the entities under their purview.”

“This authority – currently utilized by all other industry regulators – was previously temporarily granted to the NCUA and FHFA but has since expired, leaving a dangerous regulatory gap and leaving consumers and families at risk,” the congressman’s office said. “This bill would bring parity amongst our regulators to ensure that our financial services and housing industries are well protected against cyberattacks.”

At the May 17 committee markup session, Rep. Andy Barr, R-Ky., argued against the legislation, saying “it may be a good faith effort to help the IT security of our financial system,” but said he worried about expanding “the size and scope of the Federal regulation under the guise of cyber security.”

Rep. Barr faulted the bill because it doesn’t use the word “cyber” in its text, and said the measure has more to do with financial regulation than cybersecurity.

PARIS, May 17 (Reuters) – The regulation of crypto-assets is likely to be discussed at a meeting of Group of Seven finance chiefs this week in Germany, French central bank head Francois Villeroy de Galhau said on Tuesday.

“What happened in the recent past is a wake-up call for the urgent need for global regulation,” Villeroy told an emerging markets conference in Paris, referring to recent turbulence in crypto-asset markets.

“Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably … discuss these issues among many others at the G7 meeting in Germany this week,” he added.

Reporting by Leigh Thomas; Editing by Edmund Blair

Our Standards: The Thomson Reuters Trust Principles.

Image: Shawn/stock.adobe.com

17 May 2022

Europe
Reporter Carmella Haswell

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ESMA submits final reports on CCP resolution regime

The European Securities and Markets Authority (ESMA) has published six final reports of its review of the CCP Recovery and Resolution Regulation (CCPRRR) and these reports have now been submitted to the European Commission.

The final reports set out proposals for Regulatory Technical Standards (RTSs) on the content of central counterparies (CCPs) resolution plans, resolution colleges, valuation of CCPs’ assets and liabilities in resolution, and safeguards for clients and indirect clients.

It also contains guidelines on the circumstances under which a CCP is deemed to be failing or is likely to fail, as well as on the methodology to value each contract prior to termination.

Aiming to guide resolution authorities in developing effective resolution plans, the overarching goal of ESMA’s reports is to contribute to market preparedness generally and in the “unlikely event” of a CCP entering into resolution.

To determine whether a CCP has failed or is likely to fail, the relevant authorities should assess the available objective elements as they relate to the availability and adequacy of the CCP’s recovery tools, the pre-funded and committed financial resources still available to the CCP, and the liquid resources and liquidity arrangements still available to the CCP.

The authorities will also need to consider the operational capacity of the CCP and other requirements for continuing authorisation.

They should also be prepared for situations where a CCP is unable to manage the default of one or more clearing members, and where a CCP is unable to address a non-default event that results in unmanageable losses for the CCP. ESMA notes that these are both typical circumstances that may result in a CCP’s failure.

According to ESMA, the determination that a CCP is failing or likely to fail should remain an expert judgement and should not be automatically derived from any of the objective elements alone.

The European Commission has three months to decide whether to endorse the proposed standards under a Delegated Regulation.