Acting FDIC chief signals shifts on climate risk, merger review, crypto

WASHINGTON — The acting chair of the Federal Deposit Insurance Corp. is signaling a new direction for the agency that's focused on addressing the financial risks posed by climate change and digital assets, rethinking the standards for vetting bank-merger applications, and finalizing post-crisis capital rules.

Martin Gruenberg, a longtime board member at the FDIC, became the agency’s chief for the third time after the resignation of Jelena McWilliams from the post on Friday. The departure of the Trump-appointed chair followed a power struggle with her Democrat-dominated board of directors in December.

In a statement published on Monday, Gruenberg emphasized the “FDIC’s core mission” of maintaining “stability and public confidence in the U.S. financial system.”

“The FDIC carries out this mission through its responsibilities for deposit insurance, banking supervision and the orderly resolution of failed banks, including systemically important financial institutions,” Gruenberg said. “Banking supervision encompasses safety and soundness and consumer protection, both of which are essential to this important mission.”

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Gruenberg acknowledged McWilliams’ tenure at the FDIC in Monday’s statement, commending her “contributions to the FDIC, in particular for her commitment, which I share, to diversity and inclusion and minority depository institutions,” he said.

Gruenberg's return as FDIC chair was lauded by Democrats on Capitol Hill on Monday.

Senate Banking Committee Chair Sherrod Brown, D-Ohio, praised Gruenberg's "years of experience" and said his office would "look forward to working with acting Chair Gruenberg to get the FDIC back to business."

Maxine Waters, a California Democrat and chair of the House Financial Services Committee, commended Gruenberg's "extraordinary record with the FDIC," adding that given "his deep commitment to consumer protection, financial stability and financial inclusion, his leadership will help ensure the safety and soundness of the banking system while making progress on critical issues of our time."

In Monday’s announcement, the FDIC flagged five policymaking priorities for the remainder of 2022, including the completion of reforms tied to the Community Reinvestment Act, which was already an agency focus under McWilliams. A press release from the FDIC said the federal banking agencies would issue a joint rulemaking on CRA reform “in the near future.”

The rest of Gruenberg’s priorities in 2022 mark a political shift for the agency. Tackling the financial risks associated with climate change will be a “top priority” in the coming months, the agency said in a statement, including the establishment of an “FDIC interdivisional, interdisciplinary working group on climate-related financial risks.”

The agency will also seek membership in the Network of Central Banks and Supervisors for Greening the Financial System, following the lead of the Office of the Comptroller of the Currency and the Federal Reserve.

Under Gruenberg, the FDIC will pursue reforms of bank-merger policy. “In light of the significant implications of bank mergers for competition, safety and soundness, financial stability, and meeting the financial services needs of communities, a careful interagency review of the bank merger process is warranted,” the FDIC said in a statement.

The agency signaled a clear shift on crypto-related policy, writing that it would be imperative that federal regulators “fully consider the risks posed by these products and determine the extent to which banking organizations can safely engage in crypto-asset-related activities.”

The fifth priority for the FDIC in 2022 will focus on completing the implementation of the Basel III regulatory framework introduced by the international Basel Committee on Banking Supervision in 2009. It was originally set to go into effect between 2013 and 2015; regulators have since pushed back the implementation deadline to January 2023 in the wake of the COVID-19 pandemic.

The implementation of Basel III “would strengthen the regulatory framework for large banking organizations, including strengthening the capital requirements related to market risk, operational risk and the risks associated with financial derivatives,” the FDIC said.

Gruenberg has served at the FDIC in various capacities since 2005, when he was nominated by the George W. Bush administration to serve as a Democratic board member and the agency's vice chair. He first served as acting chair of the FDIC in late 2005 and once again in 2011 before becoming Senate confirmed for the role in 2012 under the Obama administration.