Economy
US Fed’s top bank cop defends effort to hike bank capital
© Reuters. FILE PHOTO: Federal Reserve Board Vice Chair for Supervision Michael Barr testifies at a House Financial Services Committee hearing on the response to the on recent bank failures of Silicon Valley Bank and Signature Bank, on Capitol Hill in Washington, U.
By Pete Schroeder
WASHINGTON (Reuters) -The U.S. Federal Reserve’s top regulatory official defended a sweeping proposal to overhaul bank capital rules before the country’s largest bank lobby on Monday, arguing the benefits of a bigger cushion outweigh any additional costs banks might face.
Fed Vice Chair for Supervision Michael Barr’s said that the complex “Basel Endgame” proposal overhauling how banks gauge the amount of capital they must hold against potential losses should have a “limited” impact on banks’ lending costs, with much of the focus on other activities, like trading.
The proposal implements international capital standards agreed by the Basel Committee on Banking Supervision in the aftermath of the 2007-2009 financial crisis. Since its release in July, banks have been pushing back hard against the plan, enlisting allies in Congress and launching ad campaigns. They say it will hurt mortgage borrowers, lending to green projects and the broader economy.
Barr’s Monday speech, which is his first on bank regulation since the proposal came out, served as a broad-based defense of the effort. He said the Fed and other bank regulators welcome comments from the industry to help refine the plan, but maintained the benefits of higher capital for lenders.
“The private costs of capital must be weighed against the social benefits of higher capital in creating a healthier, more resilient financial system,” he said, according to prepared remarks.
Barr also pushed back against the industry’s refrain that higher capital costs for banks will mean curtailed lending and potential economic harm. He noted that banks sounded similar warnings when regulators imposed tougher rules in the wake of the financial crisis, but the U.S. banking system has remained vibrant and the economy has grown.
Barr has maintained that strong capital ensures lenders can weather downturns and any surprise risks. He has cited the failure of Silicon Valley Bank and two other U.S. lenders this year as evidence the system needs to be strengthened.
Fed Chair Jerome Powell voted to propose the rules, but noted he had questions and was eager to solicit feedback. While Powell has said he would defer to Barr as the Fed’s Wall Street regulator, industry executives hope Powell’s concerns may lead to a less-stringent proposal.
“This whole episode is the first test of the operational latitude that the vice chairman for supervision has from a policymaking perspective,” said Isaac Boltansky, director of policy research for brokerage BTIG.
Barr said the Fed was “very interested” in feedback on the proposal and would welcome comments and data that ensure the final rules “accurately reflect risk.”
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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