WASHINGTON — A top Republican lawmaker on the House Financial Services Committee is calling on the Federal Reserve to unilaterally disengage from the Financial Stability Board and Basel Committee on Banking Supervision until President Trump has installed his nominees on the Fed board.

Rep. Patrick McHenry, R-N.C., vice chair of the panel, sent a letter to Federal Reserve Chair Janet Yellen dated Tuesday saying that continued participation in those international standard setting forums is “predicated on achieving the objectives set by the new administration.”

The FSB and the Basel Committee have been developing the final handful of capital rules required under the Basel III accords — which were developed among representatives of central banks from around the world in the years following the financial crisis based on directives from the Group of 20 nations. McHenry said that incoming regulators will be compelled to undergo a “comprehensive review” of the implementation of those regulations “that unfairly penalized the American financial system in areas as varied as bank capital, insurance, derivatives, systemic risk and asset management."

Rep. Patrick McHenry, R-N.C., vice chair of the House Financial Services Committee, sent a letter to the Fed demanding it immediately cease its participation in ongoing international negotiations. Bloomberg News

“Accordingly, the Federal Reserve must cease all attempts to negotiate binding standards burdening American business until President Trump has had an opportunity to nominate and appoint officials that prioritize America’s best interests,” McHenry said.

McHenry criticized the Fed for continuing to negotiate “international regulatory standards for financial institutions among global bureaucrats in foreign lands without transparency, accountability or the authority to do so.” He further criticized the “secretive structures” of the FSB and Basel committees and the resulting standards, which he said are promulgated with “little notice to the American public.”

The final regulatory standards that the Basel Committee and the FSB have developed since the crisis are not binding, but home jurisdictions are encouraged to promulgate their own rules based on the standards that are at least as stringent. The U.S. has generally exceeded the Basel minimum standards in its own rules — a trend sometimes referred to as “gold plating” — and that banks have criticized.

Congressional Republicans have long been critical of the U.S. participation in the Basel Committee and the Financial Stability Board, and the incoming administration has signaled that it intends to at least rethink its adherence to the international standards, if not jettison its participation altogether. European and other jurisdictions have similarly been rethinking their relationship with the Basel accords since late last year, and the committee has postponed its meeting to agree on the final rules, presumably because of differences among member states.

Trump’s assumption of office notwithstanding, the Fed and its representatives are still authorized to participate in the FSB and Basel committee proceedings since the regulations are not formally binding, as would be the case with a trade deal or peace treaty.

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