On 10 February 2019, at the Bank for International Settlements Special Governors’ Meeting in Hong Kong, Randal K. Quarles delivered his first vision speech as Chair of the Financial Stability Board.
Quarles, who is the Vice Chair for Supervision of the US Federal Reserve, succeeded Mark Carney as Chair of the FSB last November. His speech began by acknowledging the FSB’s record under its previous chairmen, highlighting the successful implementation of extensive post-crisis regulations and the strengthening of the global financial system’s resilience. Quarles marked this post-crisis phase as largely complete, noting significant achievements like Basel III and the improvements in over-the-counter derivatives markets. Quarles’s retrospective glance also set the stage for the FSB’s future direction. The transition from crisis response to future-oriented strategies signaled a shift in the FSB’s focus.
Three main goals stand out in Quarles’s vision for the FSB:
Flexibility. Growing out of a reactive phase during times of financial crisis, the FSB should now act proactively in identifying emerging risks and developing frameworks capable of adapting to rapid financial innovation – Quarles mentions, somewhat unoriginally, crypto-assets. Echoing the stance of other regulators of the digital economy, this commendable objective of flexibility will have to be carefully balanced with the needs of firms and customers for regulatory legibility and predictability.
Engagement. Dialogue with stakeholders in financial stability, including large financial players and the general public, is central to FSB’s legitimacy and, in turn, the effectiveness of its action. After singling out the role of Regional Consultative Groups (RCGs), Quarles called for more, and more eager, outreach efforts by the Board and its constituent parts.
Regulatory impact analysis. Quarles stressed the importance of understanding and assessing the consequences of financial reforms, not just in terms of their intended outcomes, but also their efficiency and potential unintended consequences – for instance, on innovation.
Making it ever clearer that the FSB’s post-crisis mode is over, Quarles’ chairmanship sets out to develop a more ambitious regulatory approach for the Board, while consolidating its efforts towards better process.