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While Fed staff are able to work on some measures in the
background, Raskin would need to sign off on any major policy
decisions. Here are some key ones likely to be affected:
DE-REGULATION REDUX?
Over the past four years, Quarles led a review of regulations
introduced following the 2007-2009 global financial crisis,
arguing they were too blunt and onerous. Democrats accused
Quarles of saving Wall Street billions of dollars while
increasing systemic risks and want Raskin to revisit some of
those changes.
Among the most contentious were revisions to the “Volcker Rule”
curbing speculative bank investments; scrapping a requirement
for big banks to hold capital against certain swap trades; and
stripping the Fed of its power to fail banks on their annual
“stress tests” based on subjective concerns.
Raskin would have to pick which of these to address. Even
without the nomination delay, the process of overhauling many of
these rules was expected to be extremely time-consuming.
CLIMATE CHANGE RISKS
Climate change, a top policy priority for Democrats, is expected
to rapidly rise on the Fed agenda under new leadership.
So far, the Fed has asked lenders to explain how they are
mitigating climate change-related risks to their balance sheets,
with the industry expecting to progress to a formal climate
change scenario analysis in 2023, Reuters has reported.
Those projects are expected to accelerate. The big question will
be whether Raskin pushes for restrictions or stiffer capital
requirements on banks with significant exposures to polluting
industries or other climate-specific risks.
Raskin may have to tread more carefully than progressives had
hoped given Republicans have cited her stance on climate change
as one of the reasons for opposing her appointment.
BANK M&A
The delay in nominating Raskin may compound a logjam in
approving bank tie-ups that had slowed during the past six
months due to uncertainty over Fed personnel changes.
Some pending deals were approved following Fed Chair Jerome
Powell's renomination, but the industry is still waiting for the
Fed and the Justice Department to decide on a potential new
policy for bank deals. Raskin is expected to lead the committee
that scrutinizes potential tie-ups, suggesting any new merger
policy may also need her backing.
Without that certainty, bankers and lawyers have said they would
be reluctant to pursue new tie-ups.
FINTECH FRAMEWORK
She will also have to tackle a regulatory blueprint for "fintech"
companies that are quickly chipping away at the traditional
financial sector.
The Fed is exploring how banks intersect with fintechs,
particularly with smaller lenders that may outsource more
services and infrastructure. Fintechs are also lobbying the Fed
for access to its payments system.
While other banking regulators have worked for years to bring
fintechs under their regulatory umbrella, the Fed has resisted,
fearing doing so could create systemic risks. But as the sector
continues to balloon, the Fed is expected to act.
The controversy over Raskin's role in helping fintech Reserve
Trust gain access to a key Fed service could also complicate
that process.
SUPPLEMENTARY LEVERAGE RATIO
Another issue on the table is the supplementary leverage ratio,
a rule created after the decade-ago crisis requiring banks to
hold capital against assets regardless of their risk.
The Fed had to temporarily ease that rule in the midst of the
pandemic as a glut of bank deposits and Treasury bonds drove up
capital requirements on what are viewed as safe assets.
Despite intense bank lobbying, the Fed let that relief expire
last year but promised to review the overall rule. The Fed has
yet to publish a proposal, leaving the job up to Raskin.
COMMUNITY REINVESTMENT ACT
The central bank will also play a key role in a long-awaited
overhaul of the Community Reinvestment Act (CRA) rules which
promote lending in lower-income communities.
The Fed, which shares responsibility for writing the rules with
other bank regulators, hopes the CRA can be updated to reflect
the growth in online banking, while still ensuring lenders make
meaningful contributions to the poorer areas they serve.
Raskin would likely have to be in place before the Fed could
sign off on the changes.
(Additional reporting by David French; Editing by Michelle Price
and Andrea Ricci)
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