WASHINGTON – The banking industry needs to pay attention to innovation in the payments sector, said Gregory Baer, the incoming president of The Clearing House Association.
Baer, the head of regulatory policy for JPMorgan Chase, was announced as the next president of The Clearing House Association Friday.
In an interview, Baer said the overarching policy challenge facing the industry remains the reputational damage done to it by the financial crisis. “The great challenge is to rebuild our credibility, both with the public and with policymakers,” he said.
But he also said the industry has to pay close attention to new technologies, such as digital currencies, that are changing the system. In just the past couple of days, Android released its new mobile payment system, which is expected to join other mobile pay products from Apple, Samsung and others in fundamentally changing the way people make payments. At the same time, established financial services players are investing in the technology that drives digital currency while remaining on the fence on actually accepting alternatives currencies for transactions.
“Another important challenge is in payments and currencies, which has always been the core of banking and which are now in play both as a business and as a policy matter,” Baer said.
Baer is very well-known in banking and policymaking circles, having served as a top Treasury Department official during the Clinton administration as well as having worked at the Federal Reserve Board and Bank of America. He is set on Oct. 5 to take the reins of the Clearing House Association, which lobbies on behalf of the 24 largest commercial banks, and serve as general counsel and executive vice president of The Clearing House Payments Co., the group’s payment center.
Baer said his experience working for JPMorgan and BofA gives him an added perspective that will help in the new job.
“The largest misconception about regulation – in particular capital and liquidity regulation -- is that it is agnostic among banking products or businesses. That is, banks either accept a lower return on equity or pass along the cost to their customers, but remain in the same business,” he said. “Having seen how banks actually work, I understand that regulation changes bank behavior. To some extent, we are seeing this play out in the current debate about market liquidity.”
Overall, he said policymaking has changed significantly in recent years.
“There’s been something of a sea change in regulation in the sense that – 15, 20 years ago it was really dominated by examiners or former examiners, and there’s been a real move to relying increasingly on academics. The industry has been relatively slow to adjust to that change,” he said. “The downside of that is that if you look at it through an academic lens, you can miss some of the real-world consequences that a supervisor would pick up.”
Baer will succeed Paul Saltzmann, who helped increase the Clearing House’s visibility in public debates. The group is known for submitting detailed policy positions and undertaking sometimes ambitious plans, including running a massive war game-scenario several years ago in which it simulated the failure of a large bank in order to see if new powers granted to regulators by the Dodd-Frank Act worked as intended.
“Greg is a seasoned industry executive with deep regulatory policy skills,” said Brian Moynihan, CEO of Bank of America who also serves as chairman of The Clearing House’s Supervisory Board, in a press release. “He will be a strong leader for TCH’s policy work.”