Potential Trump pick to lead bank regulator signals lighter rulewriting touch

By Pete Schroeder

WASHINGTON (Reuters) – The potential next head of a U.S. banking regulator laid out a sweeping plan on Friday to adopt a lighter touch on the banking industry on matters ranging from capital to cryptocurrency.

Travis Hill, the vice chair of the Federal Deposit Insurance Corporation, said in prepared remarks the FDIC needs a “new direction,” which he expects will be ushered in at the beginning of President-Elect Donald Trump’s second term.

Hill, who is a leading candidate to head the agency on a full-time basis and will take over as its acting chief following the Jan. 19 retirement of Chairman Martin Gruenberg, made the broad case that regulators have strayed too far in trying to police the banking sector on a range of issues, and their approach needs to change.

Specifically, Hill said he anticipates U.S. regulators will reconsider efforts to impose new capital requirements on large banks via the so-called “Basel III Endgame.” Efforts to write those rules, which would have significantly raised big bank capital via new risk measurements, stalled under Democratic leadership, and Hill said the new effort should focus on ensuring rules are written with minimal capital impact.

He added that regulators should also reconsider existing capital requirements as part of the effort, such as rules dictating credit risk transfers and leverage.

“Addressing the issue holistically and transparently…would be a much better approach,” he said in prepared remarks to the American Bar Association.

Hill also signaled a more open stance towards new technologies used by banks, including digital assets and fintech partnerships. He said the current FDIC stance of requiring banks to gain individual approval before pursuing any blockchain-related activities has been “damaging,” and that the regulator should focus on establishing clear standards of legally permissible activity.

His comments came one day after another potential Trump bank regulator, Federal Reserve Governor Michelle Bowman, similarly signaled a desire to adopt less stringent rules for banks.

Bowman, seen as a candidate to take over the Fed’s top regulatory post, called for a more “pragmatic” approach to rules instead of an “adversarial” relationship between banks and their watchdogs.