Following the bank failures of early 2023, many regulators globally have sought to ensure the so-called "banking turmoil" does not occur again. In July 2023, US banking regulators proposed a set of sweeping reforms, referred to as the "Basel III endgame," which would increase capital reserves for large banks by nearly 20%. Michael Barr, the US Federal Reserve's Vice Chair for Supervision, has encountered significant pushback as he seeks to push the plan over the finish line.
Unsurprisingly, the proposal has faced intense lobbying from both Wall Street and congressional Republicans. However, the more daunting obstacle for Barr is the unusual resistance within the Federal Reserve's own governing board. Typically emphasizing consensus, the Fed's Board of Governors showed a rare division with a 4-2 vote on the plan. The opposition from two Republican-appointed governors, alongside Chair Jerome Powell's exceedingly cautious support, underscored the need for broad support to finalize the proposal.
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