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Fed Governor Jerome Powell defends new banking rules to Chicago audience

Federal Reserve Governor Jerome Powell told an audience of bankers in Chicago on Wednesday that the Fed wants to lift some of the rules imposed on bank directors after the financial crisis, but he said the move won't pave the way to new banking disasters.

After the 2008 financial crisis and Great Recession, regulators imposed layers of new rules on banks in an attempt to shore up public confidence in the financial system and keep banks from infecting the global economy again. But bankers have balked at the extent of the regulatory requirements, and after a review of the new rules, the Federal Reserve introduced changes last month that have been criticized for being too lax.

Defending the proposals before the banking audience at the Chicago Fed, Powell said, "We do not intend that these reforms will lower the bar for boards or lighten the loads of directors."

The Fed started reviewing post-crisis regulations in 2014, Powell said. "We found that many boards have significantly improved their practices," he said. He added that banks now must hold onto more capital than previously and capital can insulate banks from trouble in risky situations.

Meanwhile, he said, "we consistently hear that directors feel buried in hundreds or even thousands of pages of highly granular information to the point where more important strategic issues are crowded out." He said proposed reforms will bring regulation of bank directors closer to the pre-crisis approach.

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