Federal Reserve Board Vice Chair for Supervision Randal Quarles identified three principles that are critical to the "relevance" and "vitality" of the Financial Stability Board ("FSB"): engagement, vigilance and analysis. This was the second speech in which he emphasized this approach. (See, prior coverage.)
In remarks at the 2019 European Bank Executive Committee Forum, Mr. Quarles said that these principles form the basis of the "most successful elements of the post-crisis reforms," and that they should remain the foundation of the FSB's work as it transitions from drafting new standards to implementing them and addressing emerging vulnerabilities.
Mr. Quarles said that regulatory cooperation has been essential to financial stability because it promotes trust. However, he noted, trust among regulators means "little on its own" and relies on constituencies' faith in regulators. He stressed the importance of the FSB's solicitation of input on risks to financial stability and engagement with businesses, public institutions and market participants.
According to Mr. Quarles, the FSB's central role is to "see past the issues and practice of the day" and pinpoint new vulnerabilities before they evolve into economic distress. He stated that the FSB Standing Committee on Assessment of Vulnerabilities will devise a new framework for the identification and evaluation of financial vulnerabilities.
Mr. Quarles said that the FSB must be willing to make enhancements when the evidence justifies them and undertake rigorous analysis before and after issuing new standards. Mr. Quarles noted that the FSB intends to bring apply "analytical rigor" to the answering of important questions concerning post-crisis policies.
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