Michael Barr will step down as head of the Fed’s banking supervision to avoid a conflict with Trump

The Federal Reserve’s top banking regulator will step down next month, paving the way for the president-elect Donald Trump name a replacement and prevent a potential confrontation between them.

Michael Barr’s resignation from the position, which is formally called vice chairman for supervision, will take effect on February 28, but he will remain in the position of head of the Fed. His powers as head of the Fed will last until 2026.

There had been speculation that Trump might try to replace Barr after he takes office on January 20, and the announcement would ease that transition amid speculation that the new president wants someone more bank-friendly to fill the role.

While he did not specifically mention rumors that Trump would try to remove him, Barr said in a statement that “the risk of a controversy over the position could distract from our mission. Under the current circumstances, I decided that I would be more effective in serving the American people from my role as governor.”

“It has been an honor and a privilege to serve as the Federal Reserve’s Vice Chairman for Supervision and to work with my colleagues to maintain the stability and strength of the US financial system so that it can meet the needs of American families and businesses. “, he said.

Bank stocks rose after the announcement. The SPDR S&P Bank the exchange-traded fund, which tracks industry leaders, rose more than 1%.

CNBC.com has reached out to Trump’s transition team for comment.

In a release announcing the decision, the Fed said it would not make any major policy decisions until a successor is named. The bank is revising a set of new rules dubbed the Basel endgame, which has been widely unpopular in the industry.

Since the Fed is limited to seven board members, Trump will have to appoint someone from the current group to the new position.

The position was created in the wake of the 2008 financial crisis, which brought down many big names on Wall Street. Under Barr’s watch, the industry faced a crisis in early 2023 that saw Silicon Valley Bank and several other names collapse, prompting the Fed to implement a liquidity mechanism to prevent problems from spreading.

In recent days, there has been speculation that Trump may try to force Barr to leave office. A This is reported by Reuters revealed in late December that Barr was consulting with a law firm about his legal options if the president-elect made the move.