The World’s New Top Bank Cop Faces a Stress Test of His Own

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The world’s new top bank cop faces a political stress test.

The Financial Stability Board on Monday confirmed that it had picked Randal Quarles as its new chair. Mr. Quarles, who is currently the U.S. Federal Reserve’s vice chair for supervision, is a strong choice to lead the organization. But he faces many challenges: A divided U.S. Congress is fighting about whether to be tough or soft on Wall Street; Brexit and other forces will also test cross-border unity.

Picking Mr. Quarles to replace the Bank of England governor Mark Carney, whose term as chair of the F.S.B. ends on Saturday, helps ensure that America remains solidly involved in devising global bank rules. That’s an important counterweight to President Trump’s habit of undermining international bodies. In a speech in the summer, Mr. Quarles presented a robust defense of the F.S.B., which sets standards but doesn’t have enforcement powers.

While Mr. Carney focused on post-crisis reforms, Mr. Quarles faces a trickier set of issues. At home, he will face competing pressures from a Democratic majority in the U.S. House of Representatives and a Republican leadership in the U.S. Senate. The new chair of the House Financial Services Committee will probably be Representative Maxine Waters, who already has Wells Fargo and Deutsche Bank in her sights. Some Republicans, including Trump administration aides, want Mr. Quarles to rein in what they see as an overreaching F.S.B.

Joined-up regulation also faces strains across the Atlantic Ocean. Britain’s planned departure from the European Union has raised doubts over whether British financial institutions will continue to abide by European Union rules. A clash over the Italian budget has already hurt the country’s lenders, straining Europe’s fledgling banking union.

The conflicting forces put pressure on the F.S.B., which operates by consensus. The plenary, which is the decision-making arm of the F.S.B., is made up of 54 representatives from across the globe. Naming Klaas Knot, the president of the Dutch central bank, as Mr. Quarles’s deputy and eventual successor should ease trans-Atlantic strains. But it also risks frustrating Asian regulators who have so far lacked a strong, unified voice.

Mr. Quarles’s diplomatic skills — which he sharpened as the U.S. Treasury’s assistant secretary for international affairs between 2002 and 2005 — will be just as important as his experience of financial regulation.

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