Quarles: Critical gains made over last decade in regulatory regime – now it’s time to make changes where rules don’t work as intended

Efforts to ensure that financial institution regulation put into effect in the wake of the financial crisis 10 years ago remains effective are underway, with an aim to making “necessary changes” to rules identified as not working as intended, Federal Reserve Vice Chairman Randal Quarles told a group in Washington Monday.

However, speaking to the spring conference of the Financial Services Roundtable, Quarles acknowledged that the regulatory regime built up over the last decade made critical gains. “The financial system is undoubtedly stronger and safer. We have robust capital and liquidity levels, an effective stress testing regime, and improved resolvability of our largest firms,” Quarle said.

Reminding the group that he has recently noted there is an opportunity to improve the efficiency, transparency, and simplicity of regulation, he said now is the natural and expected time to evaluate the effectiveness of the post-crisis regulatory regime “with the benefit of hindsight and with the bulk of our work behind us.”

“Federal Reserve Board staff members continue the review that I have previously outlined,” Quarles said. “The goal is to consider the effect of past regulatory initiatives on the resiliency of our financial system, on credit availability and economic growth, and more broadly, their costs and benefits. I am confident that that review will reveal some clear ways that we can improve the core post-crisis reforms.”

In other remarks, the Fed vice chairman said that, for cybersecurity, the Fed is aligning its expectations with existing best practices, such as the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework, and identifying opportunities to further coordinate cyber risk supervisory activities for firms subject to the authority of multiple regulators.

“We support industry efforts to improve harmonization across the sector, which are complementary to achieving our regulatory safety and soundness goals,” he said.

Speech by Vice Chairman for Supervision Quarles on the financial regulatory system and cybersecurity