Randal K Quarles: Between the hither and the farther shore - thoughts on unfinished business

Speech by Mr Randal K Quarles, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, at the American Enterprise Institute, Washington DC, 2 December 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

When I joined the Board of Governors as Vice Chair for Supervision in the fall of 2017, the Federal Reserve was in the latter stages of a decade-long effort to build a new financial regulatory framework, responding to the financial crisis of 2008. Yet, although the mortar was not yet dry on that construction project-based on the blueprint created by Congress, central banks, and supervisors around the world-there was already broad recognition across the political spectrum that the framework could be improved upon, based on the experience of how it had worked over the decade of its implementation. That was the judgement of the authors of the post-crisis blueprint, former Senator Chris Dodd and former Congressman Barney Frank. It was also the recommendation of one of my predecessors at the Fed, Dan Tarullo-a principal architect of this framework-who, in his final speech as a Fed governor, proposed several significant changes.

I came to the Fed in order to take on that task of making the system better: more simple, more efficient, more transparent. Congress also took up this effort in the broadly bipartisan Economic Growth, Regulatory Relief, and Consumer Protection Act, and we adjusted our regulatory framework to better align our requirements with the risk posed by firms to the financial system. We maintained and, in fact, raised regulatory standards for the most systemically important firms and simplified regulatory requirements for smaller firms without diminishing the resilience of the system as a whole.

In the midst of our work to improve our framework, we faced the unique experience of the COVID event, which tested that resilience. This real-life stress test demanded emergency action with respect to our regulatory framework and more broadly, including through the establishment of 13 emergency lending facilities under our role as the lender of last resort to help stabilize the financial system.