Fed considering changes to Basel proposal: supervision chief

(Reuters) – Officials at the U.S. Federal Reserve are carefully considering possible adjustments to key parts of the pending “Basel III endgame” overhaul for bank capital regulations, the central bank’s supervision chief said on Tuesday, including operational risk calculations and potential offsets for mortgage servicing.

The remarks from Fed Vice Chair for Supervision Michael Barr suggested for the first time that the Fed is mulling significant changes to a policy that has drawn stiff opposition from the banking industry, which says it needlessly risks causing banks to curtail lending.

The Fed will also publish the results of a survey on the impact of the pending reforms, Barr said, adding that public comments received so far had been “super helpful” in developing the proposal’s approach to matters like operational risk and fee-based income.

“We want to make sure that the rule supports a vibrant economy that supports low- and moderate-income communities, that gets the calibration right upon things like mortgages,” he said. “So the public comment that we’re getting on this is really critical for us getting it right. We take it very, very seriously.”

Barr also said a lending program created during the 2023 banking crisis, in which three banks with high levels of uninsured deposits succumbed to depositor runs, was an emergency measure, suggesting that it was unlikely to be renewed.

“That program was really designed in that emergency situation,” he said. “It was designed for that emergency to say, we want to make sure that banks and creditors of banks and depositors [in] banks understand that banks have the liquidity they need.”