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Efficiency a new focus in regulating Wall Street: Fed's Quarles
December 2, 2017 / 1:25 AM / 17 days ago

Efficiency a new focus in regulating Wall Street: Fed's Quarles

NEW YORK (Reuters) - The Federal Reserve’s new regulatory chief said on Friday efficiency would be a focus as the U.S. central bank rethinks rules adopted in the wake of the 2007-2009 financial crisis, and would serve to balance its existing goals of safety and soundness.

FILE PHOTO - U.S. Treasury Under Secretary for Domestic Finance Randal Quarles speaks during a Reuters sponsored panel discussion on the future of the U.S. housing foundations Fannie Mae and Freddie Mac in New York, July 19, 2006. REUTERS/Keith Bedford

The comments by Fed Governor Randal Quarles, who took the job of vice chair of supervision last month, mark his strongest hint yet that the central bank could back some of the Republican and White House efforts to slash seven year-old controls on Wall Street risk-taking.

“Efficiency has to be equally important with safety and soundness in our regulatory responsibilities,” Fed Governor Randal Quarles, the vice chair of supervision, told a small gathering of some of the world’s top current and former monetary policymakers.

“We need to achieve safety and soundness, but where we have choices we need to make the most efficient choices,” Quarles added at the Group of Thirty’s Winter Plenary forum at the New York headquarters of UBS, a bank.

Quarles also said he welcomed a blueprint for sweeping reforms published last month by the U.S. Treasury, which is spear-heading Republican President Donald Trump’s agenda to promote economic growth by slashing red tape.

Democrats and some regulators, including outgoing Fed Chair Janet Yellen, have warned against too-aggressive deregulation that could again expose the economy to the effects of a financial crisis. The last recession was the worst in decades and hobbled the world economy for years.

Jacob Frenkel, who was the Bank of Israel’s governor from 1991 to 2000, and who attended the forum, asked Quarles whether he was advocating a “trade-off” between efficiency on the one hand and safety and soundness on the other.

“I don’t think there has to be a trade-off,” answered Quarles, a Trump nominee to the Fed. “Safety and soundness in the system is the priority for the regulators but you will always be able to achieve that in more than one way.”

He added: “The pendulum will swing to where it falls... The task is not simply to find something that will be felt and welcomed very materially by the regulated community.”

Reporting by Jonathan Spicer; Editing by Sandra Maler and Diane Craft

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