The outgoing head of a key US banking regulator is airing concern that banks and industry-sympathetic regulators may go too far in efforts to ease rules established after the 2007-2009 financial crisis.
Martin Gruenberg, chair of the Federal Deposit Insurance Corporation, made a broad defense of the post-crisis regulatory landscape on Tuesday, arguing the rules have made U.S. banks safer without sacrificing profitability.
“The danger is that changes to regulations could cross the line into substantial weakening of requirements,” he said in prepared remarks to a forum on regulation and markets. “Let’s be clear: Our largest banking organizations are not voluntarily holding the enhanced capital and liquid asset cushions required by current rules.”
Gruenberg cautioned that the U.S. economy is in its third-longest expansion in history, suggesting the country may be overdue for a potentially severe correction. And if financial markets or the broader economy took a hit, regulators should be sure banks are built to weather that stress.
Specifically, Gruenberg cautioned that efforts to return monetary policy to more normal conditions at central banks across the globe could pose problems as interest rates rise. And he noted that stocks, bonds and real estate are all “richly priced,” suggesting a correction could be on the way.