US FOMC Member Barr Speaks

Thank you, and thank you for the opportunity to speak to you today.1 It is great to be here again, particularly because this year marks the 10th annual conference on the Treasury market, a milestone that is worth celebrating. I want to acknowledge the Federal Reserve Bank of New York for its leadership in this area, including the dedication and excellence it has brought to hosting this conference over the past decade, in collaboration with the Inter-Agency Working Group on Treasury Market Surveillance, led by the Treasury Department. ...

Thank you for inviting me to speak today. Since I joined the Federal Reserve Board as Vice Chair for Supervision, I have spoken many times about the importance of bank capital to the safety and soundness of banks and the stability of the financial system. It is critical that banks have the capacity to continue lending to households and businesses through times of stress. Bank capital is a key component of this resilience. And bank capital rules help to ensure that banks are holding capital commensurate with the risks of their activities and the risks that they pose to the U.S. financial system. But capital has costs too. As compared to debt, capital is a more expensive source of funding to the bank. Thus, higher capital requirements can raise the cost of funding to a bank, and the bank can pass higher costs on to households, businesses, and clients engaged in a range of financial activities. These activities are critical to a well-functioning economy that works for everyone. That's why it is important to get the balance between resiliency and efficiency right. Today, I'll return to these themes in the context of two rules of great public interest: The Basel III endgame proposal and the proposal to adjust the capital surcharge for global systemically important banks (G-SIB). The path forward post: FED'S BARR: THE FED TO MAKE MATERIAL CHANGES TO BANK CAPITAL PROPOSALS. post: FED'S BARR: THE BASEL AND GSIB SURCHARGE RE-PROPOSALS WOULD TOGETHER INCREASE CAPITAL FOR GSIBS BY 9%, THE ORIGINAL PLAN HAD RAISED THEIR CAPITAL BY 19%. post: FED'S BARR: CHANGES TO BASEL RE-PROPOSAL WOULD EXEMPT BANKS UNDER $250 BLN IN ASSETS FROM MOST NEW REQUIREMENTS EXCEPT FOR RECOGNIZING UNREALIZED GAINS AND LOSSES OF SECURITIES.

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