The market turmoil triggered by the coronavirus pandemic early this 12 months uncovered weaknesses within the U.S. monetary system that regulators are searching for to repair, stated Randal Quarles, the Federal Reserve’s vice chairman for supervision.
“Whereas swift and decisive coverage motion succeeded in calming markets, this doesn’t imply that our work is full,” Mr. Quarles stated within the textual content of a speech set for supply on Tuesday. “The Covid occasion revealed a banking system that withstood this shock fairly effectively with restricted official sector help, and a nonbank system that was considerably extra fragile.”
In March, as governments around the globe shut down swaths of the economic system to gradual the unfold of the novel coronavirus, investor panic prompted widespread turmoil in monetary markets. That prompted a blitz of measures by the Fed to maintain credit score flowing by way of the economic system as traders and monetary companies scrambled to protect money.
Amongst these initiatives have been applications to offer liquidity to money-market mutual funds, which massive and small traders typically use as a substitute of financial institution accounts to park money, and commercial-paper markets, which corporations routinely faucet for short-term loans.