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# Fed Governor Barr warns US bank deregulation risks a short-term 'sugar high'
- URL: https://www.theglobalbanker.com/federal-reserve-governor-barr-said-us-deregulation-sparked-short-term-sugar-rush/
- Published: 2026-06-08T17:12:11.000Z
- Updated: 2026-10-01T23:47:47.000Z
- Description: Federal Reserve Governor Michael Barr said Saturday that recent regulatory and supervisory changes in the United States constituted the most significant banking deregulation since the Global Financial Crisis, warning of attendant risks.
- Author: TGB Editorial Team
- Tags: Regulations, Americas

Federal Reserve Governor Michael Barr said Saturday that recent regulatory and supervisory changes in the United States amounted to the most significant deregulation of the banking system since the Global Financial Crisis, and he cautioned that deregulation can provide a short-term "sugar high" but lead to long-term costs for society.

In a speech at American University in Washington, Barr said, "Taken together, the regulatory and supervisory changes recently enacted or proposed represent the most significant deregulation of the banking system since the Global Financial Crisis." 

#### REGULATORY LANDSCAPE

He cited less stressful bank stress tests, an eroded leverage ratio, a Basel III proposal that falls short of the international standard and a reduced GSIB surcharge, which he said in aggregate reduce the capital required for the largest banks by 6%, or $60 billion.

Barr said he had voted against these changes and that the costs they impose, in the form of risk, "greatly outweigh the promised benefits of a lighter regulatory burden." 

#### SHORT-TERM GAINS, LONG-TERM COSTS

Barr said that in the near term deregulation can deliver "something akin to a sugar high, in the form of more lending or market activities and higher profits," but that this comes at the expense of greater vulnerability and risk for the financial system and the economy in the longer term. 

He also said bank supervision was becoming weaker, citing changes to the rating system for the largest firms and reduced issuance of matters requiring attention, and said a push to lower liquidity requirements appeared likely. 

Citing research, Barr said financial crises are followed by large and highly persistent declines in GDP, and that bank capital and liquidity requirements reduce the probability and severity of such crises. 

**Sources: Federal Reserve Board; Banking Dive**[](https://www.bankingdive.com/news/barr-short-term-sugar-rush-of-deregulation-bears-risks/822252/)