Federal Reserve Vice Chairman Randal Quarles told the Senate Banking Committee today that he sees the overall risks to financial stability as “moderate,” but that there are some risks around nonbank financial institutions. Quarles told the committee that COVID-19 highlighted some risks in the potential exposure of nonbanks in the financial sector, and that these exposures could be a source of instability. He added, however, that he does not think the risk is large at this time.
“One area where I’m particularly focused, both domestically and also in my international work as chair of the [Financial Stability Board], is on the regulatory framework for nonbank finance,” said Quarles. “I think we saw that there could be some improvements in that regulatory framework that would make the system more resilient for the next time it faces a shock like March of 2020.”
During the hearing, Quarles also addressed the Fed’s work on climate change, saying it is in the early stages of developing a framework for climate financial risk but added that “our job is ensuring the resilience of the financial system, not advancing a particular view of climate policy. That’s for Congress, perhaps other agencies—it’s not the job of the Fed or other financial regulators.”