The new head of the Fed's bank will make crypto and climate change his or her top priorities.
KEY POINTS
- Fed Governor Michael Barr gave his first policy speech since being confirmed by the Senate. He is vice chair for supervision, which gives him a lot of power over the banks in the country.
- He pushed for action on stablecoins, getting ready for climate change, and making sure the finance industry is both safe and fair.
- Barr is in charge of a financial system that is generally thought to be well-capitalized. However, in the early days of the Covid crisis, market problems forced the Fed to step in.
In a speech on Wednesday, the new banking regulator for the Federal Reserve laid out a wide-ranging agenda. He called for action on stablecoins, preparing for climate change, and making sure the financial industry is both safe and fair.
Fed Governor Michael Barr gave his first policy speech since being confirmed by the Senate. He is vice chair for supervision, which gives him a lot of power over the banks in the country.
One of his main goals is to get Congress to pass strict rules about stablecoins, which are cryptocurrencies that are tied to other assets, usually currencies.
He also said that the Fed will start a project next year to "better assess the long-term financial risks that the largest institutions face because of climate change."
He also said that it would be a top priority to work toward a system that is not only financially sound but also fair, especially for people with lower incomes who have less access to banking services.
In a speech at the Brookings Institution in Washington, D.C., Barr said, "Fairness is the foundation of financial oversight, and I am committed to using the tools of regulation, supervision, and enforcement to make sure that businesses and households have access to the services they need, the information they need to make good financial decisions, and protection from unfair treatment."
Barr is in charge of a financial system that is generally thought to be well-capitalized. However, in the early days of the Covid crisis, market problems forced the Fed to step in. The rise of cryptocurrencies and stablecoins has also caused problems for the Federal Reserve, which is looking into making its own digital currency.
He asked for more attention to be paid to the crypto industry and the risks it brings.
"Like other kinds of private money that aren't regulated, stablecoins could be a threat to the stability of the economy," Barr said. "I think Congress should move quickly to pass the important laws that are needed to bring stablecoins, especially those that are meant to be used as a form of payment, inside the prudential regulatory perimeter."
On climate change, Barr stepped into a topic that has been criticized by some Republican leaders in Congress, who think the Fed is going beyond its job description.
Barr said that the Fed wants to know what risks climate events pose to the system, but he also said that the Fed's interest in the issue is "important but narrow."
Along with the Office of the Comptroller of the Currency and the FDIC, the Fed is working on ways for banks to "identify, measure, monitor, and manage the financial risks of climate change." We are also thinking about how to create and use climate risk scenario analyses."
Barr said that he wants a system that gives consumers access to services and information to protect them from being taken advantage of.
"As new financial products are made and grow quickly, excitement can get in the way of a good risk assessment," he said. "As we've seen with the rise of crypto assets, in a rapidly rising and volatile market, people may think they understand new products when they don't, causing them to lose a lot of money."
Barr said that he will also work to make sure that banks that are involved in crypto-related projects have controls in place to limit the risk.