Pete Schroeder — 7 September 2022

In his first speech since joining the Fed in July as Vice Chair of Supervision, Michael Barr outlined an ambitious agenda that could spell a shake-up for big lenders which enjoyed a lighter touch, including easing of some capital rules, under the central bank's previous Republican leadership.

Barr said the capital framework was due for a review to ensure the rules were keeping up with emerging new risks.

"We are looking holistically at our capital tools to understand how they are supporting the resilience of the financial system, individually and in combination," adding the review could inform adjustments to annual bank "stress tests," the supplementary leverage ratio and the countercyclical capital buffer, three key capital levers.

Barr also said the central bank planned to launch a pilot "scenario analysis" next year to assess climate-related financial risks facing lenders, a hotly awaited exercise that over the long-term could change who banks do business with. Barr said next year's test would not, however, dictate capital or who banks can lend to.