Randal Quarles, the Fed’s bank regulator, to pitch Congress on stress test, liquidity changes

U.S. President Donald Trump’s top banking regulator will tell lawmakers on Tuesday that he wants more industry input into stress tests and to ease liquidity requirements for large, non-global lenders.

Federal Reserve vice chair for supervision Randal Quarles plays a key role in Trump’s pledge to spur economic growth by easing post-financial crisis regulations, and his proposals will likely be challenged by Democratic lawmakers.

Quarles will appear before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Thursday, giving lawmakers their first opportunity to quiz the Fed official since he took office in October.

But Quarles, a former Wall Street lawyer and U.S. Treasury official, will likely strike a measured tone, with the Fed looking to avoid political friction under the chairmanship of Jerome Powell.

Quarles will warn of the need to retain key post-crisis reforms that have made the financial system safer, while also arguing that some can be simplified without creating new risks, according to written testimony submitted on Monday.

“We are mindful that, just as there is a strong public interest in the safety and soundness of the financial system, there is a strong public interest in the efficiency of the financial system,” he said in the prepared remarks.

The so-called stress tests that analyze how a bank would cope with market shocks should be put out for public comment, Quarles will say. Banks have long complained the tests are too opaque.

He will also propose easing liquidity requirements for big banks that are not global, as part of a broader effort to tailor rules to firms’ size and risk profile. During his six months in office, Quarles has already proposed easing other aspects of annual bank stress tests and begun work to simplify the so-called Volcker Rule banning banks from making profit-seeking trades on their own account.

Last week, the Fed also proposed simplifying capital rules by making them more sensitive to firms’ business models, a move that could potentially ease the capital burden for some banks.

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