Trump-Era Top Bank Regulator Quarles Defends Stance Before SVB
Randal Quarles, the top bank regulator during the Trump administration, defended his stance on financial regulation before the Senate Banking Committee on Wednesday. Quarles, who served as the Federal Reserve’s vice chairman for supervision from 2017 to 2021, was testifying before the committee as part of its investigation into the collapse of the Swiss bank SVB Financial Group.
Quarles, who is now a senior fellow at the Brookings Institution, was asked to explain why he had not taken a tougher stance on SVB’s risk management practices. He argued that the Fed had taken a “balanced approach” to regulating the bank, noting that the Fed had issued a number of enforcement actions against SVB during his tenure.
“We took a balanced approach to our supervision of SVB,” Quarles said. “We took a number of enforcement actions against the bank, including a cease-and-desist order in 2018 and a civil money penalty in 2019. We also worked with the bank to strengthen its risk management practices and capital levels.”
Quarles also noted that the Fed had increased its scrutiny of SVB in the years leading up to its collapse. He said that the Fed had conducted a number of examinations of the bank, including a comprehensive review in 2020.
“We conducted a number of examinations of SVB during my tenure, including a comprehensive review in 2020,” Quarles said. “We also took a number of supervisory actions to address the bank’s risk management practices and capital levels. We believe these actions were appropriate and necessary to protect the safety and soundness of the bank.”
Quarles also defended the Fed’s decision to allow SVB to continue operating despite its weak financial condition. He argued that the Fed had taken a “prudent” approach to regulating the bank, noting that the Fed had imposed a number of restrictions on SVB’s activities in order to protect its customers.
“We believe that our approach to regulating SVB was prudent and appropriate,” Quarles said. “We imposed a number of restrictions on the bank’s activities, including limits on its ability to make certain types of loans and investments. We also required the bank to maintain higher levels of capital and liquidity than would otherwise be required.”
Quarles also noted that the Fed had taken steps to ensure that SVB’s customers were protected in the event of its collapse. He said that the Fed had worked with the bank to ensure that its customers’ deposits were insured by the Federal Deposit Insurance Corporation (FDIC).
“We worked with the bank to ensure that its customers’ deposits were insured by the FDIC,” Quarles said. “We also took steps to ensure that the bank’s customers were protected in the event of its failure, including requiring the bank to maintain higher levels of capital and liquidity than would otherwise be required.”
Quarles concluded his testimony by noting that the Fed had taken a “balanced approach” to regulating SVB. He argued that the Fed had taken a number of steps to protect the bank’s customers, while also taking enforcement actions against the bank when necessary.
“We believe that our approach to regulating SVB was balanced and appropriate,” Quarles said. “We took a number of steps to protect the bank’s customers, while also taking enforcement actions against the bank when necessary. We believe that this approach was in the best interests of the bank’s customers and the financial system as a whole.”