Morgan Stanley's Pruzan Says Powell Reform Ideas Look Promising

(Bloomberg) -- Morgan Stanley Chief Financial Officer Jonathan Pruzan said he likes what he’s hearing from Federal Reserve Chairman Jerome Powell, especially reform ideas that might loosen up the Volcker Rule and the industry’s annual stress tests.

“When you’re given a test that changes dramatically year over year, I think that’s a difficult position,” Pruzan said Wednesday at a conference hosted by Credit Suisse Group AG. “So I like what Governor Powell’s talking about transparency and maybe a little bit more ability to see what’s coming.”

Morgan Stanley's Pruzan Says Powell Reform Ideas Look Promising

Powell, who took over from Janet Yellen on Feb. 5, has said he would be on the lookout for any threats to financial stability while also making regulations more efficient. President Donald Trump is seeking to ease some of the rules, but U.S. banks in the meantime are facing the toughest stress tests in years. The Fed annually seeks information to show firms have enough capital to withstand a steep economic contraction.

Morgan Stanley's Pruzan Says Powell Reform Ideas Look Promising

The Volcker Rule, which restricts banks from using proprietary funds in certain investments to prevent conflicts of interest, is also facing potential changes as regulators including Randal Quarles, the first-ever vice chair of supervision, seek revisions.

With the Volcker Rule, banks like Morgan Stanley face burdensome and overlapping reporting requirement, Pruzan said. “Governor Powell’s talked about taking a rethink of that,” Pruzan said. “Anything that reduces the administrative burden and also improves liquidity in the markets would be very positive. So I think we feel good about the tone and also the direction of travel.”

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