U.S. Federal Reserve (Fed) Chairman Powell Discusses the Revision Process for the Basel III Final Draft

US Federal Reserve (Fed) Chairman Jerome Powell said Wednesday in his second-day congressional testimony before the House Financial Services Committee that he is “very close to agreement” on Basel III changes proposed by the Federal Reserve (Fed).

Chairman Powell stated that no agreement has yet been reached with the Federal Deposit Insurance Corp. (Federal Deposit Insurance Corp.) and the Office of the Comptroller of the Currency (Office of the Currency) on how to adjust Basel III proposed by the Federal Reserve (Fed).

The Federal Reserve plans to set a new public comment period after announcing the amendments.

Basel III's final rule changes include adjustments to surcharges for global systemically important banks, but will not include the Federal Reserve's bank stress tests, he said.

On Tuesday, Powell testified before the Senate Committee on Banking, Housing, and Urban Affairs.

10:37 AM ET: Regarding the revision process for the Basel III final draft, Chairman Powell said, “I think we can agree quite soon.”

10:41 AM ET: The Federal Reserve (Fed) is studying several new Supreme Court decisions to assess how they apply to regulators. This includes the court's decision on the Chevron case and how it affects the central bank's ability to make rules. Chairman Powell commented that the Federal Reserve will abide by the rule of law. Note that Mr. Powell is not an economist, but a person who has been trained as a lawyer.

10:44 AM ET: Chairman Powell has repeatedly emphasized that the US debt situation is unsustainable.

10:48 AM ET: Chairman Powell has repeatedly stated that the Federal Reserve has not reached an agreement with the FDIC and OCC on the Basel III revision process. Also, they avoided making an explicit statement about whether it would be in the form of a complete re-proposal. “It's going to be a very laborious and time-consuming process. It is said that not all capital plans will be re-proposed.

10:50 AM ET: Inflation was caused by “enormous demand” and “supply constraints” as a result of the pandemic. In response to a question about so-called “greedy inflation,” he said that it is difficult to track the link between inflation and earnings.

10:59 AM ET: “American banks will be dealing with this (the final stage of Basel III) for many years. The important thing is not to do it quickly, but to do it right,” President Powell said.

11:01 AM ET: Chairman Powell stated that rulemaking carried out by the Federal Reserve regarding bank liquidity assessments is subject to public comment.

11:05 AM ET: “We are not climate policy makers,” said Chairman Powell. As a financial regulator, the Federal Reserve is asking banks to understand the risks they face due to climate change, he said.

11:11 AM ET: The Fed is in the “pretty early stages” of the liquidity framework. It is said that the Federal Reserve plans to start proposing liquidity later this year.

11:19 AM ET: “We don't have to wait until inflation falls below 2%. “Inflation is gaining momentum. If we wait until the inflation rate falls to 2%, the monetary policy authorities will move too slowly.