Barr Worries Less Fed Supervision May Let Risks Build

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00:00we are now, I believe, at a moment of inflection in the regulatory and supervisory approaches

00:06that help to keep banks healthy. There are growing pressures to weaken supervision,

00:12to scale back examiner coverage, to dilute rating systems, and to redefine unsafe and unsound

00:19practices in ways that will make it harder for examiners to act before it is too late to prevent

00:26a buildup of excessive risk. These pressures present real dangers to the American people.

00:33Supervision delivers clear benefits, not only for individual banks, but also for the stability

00:38of the financial system as a whole. Enforcement actions are associated with lower systemic risk,

00:44and research shows that banks subject to more oversight are safer and just as profitable as

00:50their peers. While supervision does impose costs, it is most effective when calibrated to the risks

00:57each institution poses. More closely supervised banks tend to experience steadier income

01:04and fewer loan losses, making them more resilient in times of stress when contagion risks are greatest.