US FDIC chair to resign as uncertainty hangs over proposed banking rules
Martin Gruenberg, chairman of the US Federal Deposit Insurance Commission, on Monday announced his intention to resign after a damning report on the agency's toxic workplace. The news leaves uncertainty over major proposed capital requirements for the country's largest private banks.
“In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed,” Mr Gruenberg said. “Until that time, I will continue to fulfil my responsibilities as chairman of the FDIC, including the transformation of the FDIC’s workplace culture.”
The White House said President Joe Biden would soon put forth a nomination for Mr Gruenberg's successor.
The banking official faced calls to resign from Republicans during two hearings on Capitol Hill last week over an independent report that found the FDIC was rife with sexual harassment, discrimination and mismanagement.
The investigation was launched after The Wall Street Journal reported the FDIC had a culture of sexual harassment and discrimination. More than 500 people called into the investigators' Hotline.
The report also found Mr Gruenberg had a reputation for losing his temper and “interacting with staff in a demeaning and inappropriate manner”. During his testimony last week, he apologised for his conduct and insisted he was best suited to lead the changes at the FDIC.
Although he initially survived last week's hearings, his position became untenable after Senate banking committee chairman Sherrod Brown, a Democrat, called on Mr Biden to replace him.
“After chairing last week’s hearing, reviewing the independent report and receiving further outreach from FDIC employees to the banking and housing committee, I am left with one conclusion: there must be fundamental changes at the FDIC,” Mr Brown said in a statement on Monday morning.
“Those changes begin with new leadership, who must fix the agency’s toxic culture and put the women and men who work there and their mission first.”
By opting to remain as FDIC chair until a successor is chosen, Mr
Gruenberg avoids having leadership split evenly between Democrats and Republicans.
Had he immediately stepped down, the split leadership could have significantly stalled major banking regulations.
Chief among them are the proposed capital banking requirements, for which the FDIC and Federal Reserve pushed after the collapse of Silicon Valley Bank last year.
The rules, part of the Basel III endgame, would require the largest banks to increase their capital by about 19 per cent. But those proposed requirements were widely panned by big banks and Republicans for possibly doing more harm to small businesses. And more than 97 per cent of the 350 letters received during the comment period opposed the new rules outright.
Facing such opposition, Fed officials have indicated a willingness to adjust the rules.
Fed chairman Jerome Powell, who voiced scepticism but ultimately voted in favour of the capital banking requirements last year, has said he expects “broad and material” changes to Basel III.