Systemic Risk Council Urges Congress To Demand Renewed Vigilance In Preserving Stability After US Equity Market Episode

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Systemic Risk Council Urges Congress To Demand Renewed Vigilance
In Preserving Stability After US Equity Market Episode 

WASHINGTON, D.C. — On March 3, 2021, the Systemic Risk Council (SRC), funded by CFA Institute, issued a letter to the US Congress on the resilience and stability of the financial system in the wake of the recent extraordinary equity market volatility.

In addition to well publicized questions on market integrity and efficiency raised by the GameStop episode, the Systemic Risk Council urges the Senate Banking Committee and House Financial Services Committee to ensure the following four financial stability-related issues are properly addressed by the administration and the regulatory agencies:

•    Whether the clearing house’s collateral practices were adequate
•    Whether capital requirements for broker dealers are high enough
•    Whether re-hypothecation of collateral should be banned, or constrained
•    Whether the financial authorities could have done more to maintain system-wide resilience as feverish levered trading in capital markets was fueled by sustained monetary measures to support economic recovery

Paul Tucker, chair of SRC, said:

“While the recent equity market kerfuffle was not a direct threat to stability, the authorities must energetically learn from an ugly episode involving a scramble for collateral, to close out positions, and to cut off services. Congress should ensure the unfinished business of rebuilding the financial system’s resilience resumes.”

The full text of the SRC’s letter to Congress is available by clicking  here.

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About The Systemic Risk Council
The Systemic Risk Council (SRC or Council) is a private sector, non-partisan body of former government officials and financial and legal experts committed to addressing regulatory and structural issues relating to global systemic risk, with a particular focus on the United States and Europe. It has been formed to provide a strong, independent voice for reforms that are necessary to protect the public from financial instability. The goal is to help ensure a financial system in which we can all have confidence.

The SRC was formed by CFA Institute and The Pew Charitable Trusts in June 2012 to monitor and encourage regulatory reform of U.S. capital markets focused on systemic risk. CFA Institute became the sole supporting organization in August 2015. The statements, documents and recommendations of the Council does not necessarily represent the views of the supporting organization.