On Tuesday, Federal Reserve Chair Powell was questioned by the Senate Banking Committee about more than just monetary policy. Republican lawmakers asked him for more clarity on capital requirements for big banks, cryptocurrencies, and climate regulation.
Banks are worried that the Federal Reserve is planning to increase the amount of money that financial institutions need to have on hand in case of future losses. This concern came after comments from the Fed’s Vice Chair of Supervision, Michael Barr, about a “holistic review” of those capital requirements last year. Republican Ranking Member Tim Scott also expressed concerns about this review in a letter to Powell and during the hearing.
Scott worries that requiring banks to hold more money that is not based on risk could cause more harm than good. Powell assured Scott that any proposals will be tailored to the risk, size, and complexity of an individual bank.
Powell was also asked about cryptocurrencies and their risks to financial institutions. He said that stablecoins on public blockchains have proven to be susceptible to fraud and money laundering and are not consistent with sound banking. Powell emphasized that the Fed is closely monitoring the crypto space and ensuring that regulated financial institutions are careful in their engagement with it.
