Remarks by FSB Chair Randal K. Quarles about tenets that he believes are essential to preserving the relevance and vitality of the FSB.
Regulatory cooperation has long been essential to financial stability--not only because it fosters consistency in global rules, but also because it fosters trust. When authorities develop new policy together, when they identify common standards and implement them in their home countries, and when they plan and debate the nature of emerging risks, they also develop a common understanding of each other’s work and a common approach to addressing new problems.
Claims about fintech run the gamut from the utopian to the apocalyptic--yet the mantle of fintech covers a wide range of new business models, products, and trends. Their contours and their impact also vary across national boundaries, from mobile wallets in Kenya, to online mortgages in the United States, to money market funds founded by technology companies in China. Understanding one of these new uses of technology is not the same as understanding all of them. Identifying the risks and opportunities they pose requires context, information, and insight that can only come from a variety of stakeholders with experience developing, using, and monitoring them.
Nonbank financing has grown since the financial crisis, and it has been a source of systemic risk, often involving high leverage, maturity and liquidity mismatches, opaque structures, and concentrated holdings of risky assets. Nonbank financing can also lead to lower lending standards, bidding up the price of risky assets and sending an encouraging signal to credit underwriters. These channels played a role in the recent global financial crisis, and more recently, new forms of interconnectedness between nonbank financial firms and the banking system have emerged. In some scenarios, both domestically and internationally, such ties could amplify risks.
The spirit of self-reflection should guide the FSB’s efforts in other policy areas. Stakeholders trust the FSB to undertake thoughtful, detailed work on emerging risks to financial stability. Yet identifying those risks before a crisis means dealing in uncertainty, and making policy on evolving issues, where no one can claim complete expertise. To maintain that trust, we must be willing to make improvements when the evidence justifies it--to undertake rigorous analysis, before and after issuing new standards, and to follow that analysis where it leads.
Full speech
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