Quarles sees ‘unique opportunity’ in EGRRCPA for regulating large banks – but expects debate

The Federal Reserve has a “unique opportunity” resulting from new legislation to further tailor its supervision and regulatory framework for large banks – but how it employs that opportunity will be subject to debate, the chief of supervision for the central bank said Wednesday.

In remarks before a meeting of the American Bankers Association in Utah, Federal Reserve Board Vice Chairman for Supervision Randal Quarles noted that the enactment of regulatory relief legislation this spring (the Economic Growth, Regulatory Relief, and Consumer Protection Act, EGRRCPA) requires the Fed to “tailor its framework of supervision and regulation of large firms in a manner that continues to recognize size as one risk factor, but also more holistically incorporates other risk categories.”

He said the Fed has an opportunity to tailor its approach for regulating large banks in a manner that allows the central bank to be more risk-sensitive “while still meeting our core goals of promoting safety and soundness and enhancing financial stability.”

However, he noted that in implementing EGRRCPA, “we should consider tailoring regulation further to take into account large banks’ complexity and interconnectedness.”

In any event, Quarles said, the Fed can be expected to be “highly engaged” in the public feedback process as its implements the “tailored framework” he described. He called implementing the new law a “high priority for the board” and that the Fed looks forward to “hearing the range of views as we make progress.”

Fed Vice Chairman for Supervision Randal K. Quarles:Getting It Right: Factors for Tailoring Supervision and Regulation of Large Financial Institutions