Randal Quarles

During a House Financial Services Committee hearing, Democrats largely praised the policy decisions of acting regulators named by the Biden administration and knocked their predecessors. But Republicans warned that moves to reverse Trump-era policies would leave financial institutions without a clear road map.

Federal Reserve Vice Chair Randal Quarles has made it clear that banks failing to make the transition away from the benchmark rate could face supervisory consequences.

Legacy contracts using the London interbank offered rate — which is set to be phased out at the end of this year — were granted a reprieve to mid-2023. However, there is no wiggle room on when the rate will expire for new deals, said Federal Reserve Vice Chairman Randal Quarles.

Vice Chairman of Supervision Randal Quarles said the agency wants to figure out why banks are holding on to capital that could be used more aggressively to respond to the pandemic.

The general structure of this year’s reviews is unchanged despite the pandemic. But a supplemental analysis of banks' response to the downturn could weigh heavily in evaluating 2020 capital distributions and making adjustments to the tests over the long run.

In another rollback of the bank trading ban, the federal agencies unveiled a plan to allow financial institutions to invest in multiple companies through certain fund structures.

Alternative data "may improve the speed and accuracy of credit decisions and may help firms evaluate the creditworthiness of consumers," the agencies said.

Executives sent a letter to the federal banking regulators last month expressing concern that an alternative to the London interbank offered rate could limit credit availability.

A new set of tougher scenarios did little to keep large banks from passing the most recent stress tests mandated by the Dodd-Frank Act.

Although Libor will will not be phased out until at least 2021, Randal Quarles said making the switch early is "consistent with prudent risk management."