Bloomberg News

A senior official from the Federal Reserve Board of Governors wants a better understanding of recent developments Supreme Court decisions Before the central bank changes its decision Bank swap fees cap.

Speaking on stage at The Clearing House’s annual conference on Tuesday, Fed Governor Christopher Waller said he wanted the high court’s decisions to be better understood. Loper Bright Enterprises v. Raimondo and Corner Post Inc., v. Federal Reserve Board before the Fed gets its way Update to Regulation II.

“The legal uncertainty for me right now with Chevron and Corner Post and all the legal cases… I’d like a little more clarity on how the courts are going to interpret things, like how we interpret Reg II. Waller said, “a major new proposal or a new phase put it out there,” he said. “I’d like to see how fast it happens.”

Loper Bright It overturned a precedent known as the Chevron deference, under which courts were instructed to defer to the agency on matters of interpretation of obscure statutes. Corner Post has already extended the period within which regulatory rules can be challenged, which could have more direct consequences on Regulation II. The cases are two of several decided at the Supreme Court’s most recent session that are expected to change the way regulations are drafted and challenged.

Corner Post is a truck stop in North Dakota that is challenging Reg II of the Fed’s 2010 Dodd-Frank Act, called the Durbin Amendment, which calls for the Fed to set a cap on debt swap fees and collect data on activity in the U.S. . space.

In October 2023, the Fed proposed a regulatory update that would adjust various components of the cap. The base pay will drop from 21 cents to 14.4 cents, and the ad valorem, or percentage-based, multiplier component will drop from 5 basis points to 4 basis points. The fraud prevention component will increase slightly.

The agency said the changes would reflect lower overall costs that debit card issuers have faced in recent years. Banks and exchange operators say the Fed’s policy is based on: misinformation. They also noted that the reduction in swipe fee revenue would hinder their ability to offer free accounts to low-income individuals. Supporters of the proposal say banks could offset revenue losses by reducing rewards programs.

During the event, Waller said the Fed was still evaluating data collected on the potential impacts of the proposed changes. Specifically, he said the agency is trying to understand the relationship between card-not-present transactions and fraud costs.

“Everything we heard was that this had a different impact on fraud costs than existing card (transactions),” Waller said. “So we’re trying to figure some of that out.”

Waller started the event with a speech about faster payments. During these remarks, he outlined his views on the Fed’s role as a payment system operator.

Waller, who chairs the Federal Reserve Board’s payments committee, said the Fed should only enter this arena when there are open market gaps. He said the ideal underpinned the Fed’s founding in 1913, after a lack of central clearing contributed to a series of banking panics in the late 19th and early 20th centuries. That principle still applies to FedNow, the Fed’s instant payments network that launched last summer, he said.

Waller praised the RTP network, the private instant payment system owned and operated by TCH and major bank members, but noted that it is solely the government’s duty to bring the more than 8,000 banks and credit unions across the country into the real-time payment space. can make it.

“The role we play with FedNow is to help with this coordination problem by leveraging our existing connections with thousands of institutions,” Waller said. “And this approach is consistent with my general view of the appropriate role of government to narrowly address problems such as coordination problems that cannot always be addressed effectively by the private sector alone.”

Waller during the event reiterated his position He stated that the central bank digital currency is a search for a solution to a problem. He also acknowledged elements of the crypto industry; It supported the underlying infrastructure it created rather than the digital assets it created.

“I find it very interesting how things like blockchain, tokenization, smart contracts can potentially be brought from the crypto world. Forget the object being traded,” he said. “I don’t care if you trade Dogecoin or Bitcoin. I’m more interested in the technology and how that technology can be transferred to traditional finance, to banking, to make it efficient, easy and fast.”

While it’s important for the Fed to be open to new technology, Waller said the agency also has an obligation to pay attention to legacy systems — those that are functionally obsolete. He noted the Fed’s decision to shut down the cross-border payment system FedGlobal ACH due to declining usage.

Waller said the history of this program also teaches a valuable lesson that trends in payments don’t always go as expected.

“We created Global ACH 20-something years ago out of a need for better global payments. We put a lot of money into it, we built it, and no one used it. We eventually shut it down,” Waller said. “We’re not going to run this thing for decades and nobody’s going to use it. My point is: At the end of the day, we can’t just build systems and keep paying for them if nobody’s using them.” and while you’re running them, at some point you have to cut the cord and take a day off.”