threats to the US financial system remain elevated

WASHINGTON – The nation’s top financial regulators told Congress on Friday that threats to U.S. financial stability remain elevated even as the country has recovered from what appear to be the worst economic shocks of the pandemic.

In its annual report on threats to the economy, the Financial Stability Supervisory Board for the first time highlighted climate change as an emerging risk, citing, among other things, potential loan losses from floods and wildfires in Forest.

The Biden administration has made climate change a top priority, reversing the Trump administration’s decision to withdraw the United States from the Paris climate accord.

The board is chaired by Federal Reserve Chairman Jerome Powell, Treasury Secretary Janet Yellen and the heads of other regulators, including the Securities and Exchange Commission, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

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The council was created by Congress in 2010 to address coordination gaps among financial regulators that were revealed by the 2008 financial crisis. The council is required to issue an annual report to Congress assessing risks to the financial system.

Yellen, speaking before the panel approved the report on Friday, said the turmoil that enveloped financial markets after the hit of COVID-19 in March 2020 was dealt with quickly by the Federal Reserve and other agencies. . She said the response showed “the financial system is much more resilient to shocks” than it was when the 2008 crisis hit.

While there have been improvements, Yellen said the board still finds the risks to financial stability to be high compared to the pre-pandemic period.

Another emerging threat listed in the council’s report is cybersecurity. The council argued that more needs to be done to protect banks and other financial institutions from ransomware, malware attacks and data breaches.

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The report also noted how much of this remains unknown at present. Among the concerns were the fast-spreading omicron variant of the virus, a recent but persistent spike in inflation and fears that financial turmoil in China could negatively affect the US and global economy.

“Global economic activity in the era of COVID-19 has been unusually volatile, with periods of economic shutdowns followed by rapid growth amid reopening,” the report said.

As part of the response to climate change, the council on Friday approved the creation of an inter-agency task force to monitor climate change risks.

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Don F. Davis