Fed's Quarles Is in Two-Horse Race to Succeed Carney at FSB

(Bloomberg) -- Randal Quarles, the Federal Reserve’s vice chairman for supervision, is vying with the head of the Dutch central bank to lead a watchdog panel for the global financial system.

Quarles, the U.S. central bank’s chief Wall Street regulator, and Klaas Knot are the front-runners to lead the Basel-based Financial Stability Board after Mark Carney steps down on Dec. 1, according to people with knowledge of the succession process. European resistance to installing an American atop the FSB has softened with the easing of trade tensions between the U.S. and the European Union, one of the people said.

Fed's Quarles Is in Two-Horse Race to Succeed Carney at FSB

Though Quarles was picked by President Donald Trump for the key Fed role, his defense of U.S. involvement in the FSB would seem to put him at odds with the president’s “America first” agenda and suspicion of international agreements.

The FSB was created in 2009 to drive implementation of rules agreed on by the Group of 20 nations after the global financial crisis. Its most notable achievement is the adoption of standards intended to end the era of too-big-to-fail banks. The so-called Total Loss-Absorbing Capacity rules are designed to ensure taxpayers aren’t on the hook when a major lender collapses.

Knot, 51, was appointed in May to a second seven-year term as president of the Dutch central bank. This also extends his stay on the European Central Bank’s Governing Council, where his views are considered hawkish. His name has also been mentioned as a possible successor to Mario Draghi as president of the ECB.

The Dutchman has said that while early signs of “much stronger resilience in the core financial system are encouraging,” it’s too soon to tell whether enough has been done. “Too-big-to-fail incentives have surely been reduced, but few would argue they have actually been eliminated,” he said in a Sept. 24 speech at the Peterson Institute for International Economics.

Fed's Quarles Is in Two-Horse Race to Succeed Carney at FSB

Quarles, 61, has called the FSB vital for elevating worldwide safeguards. Addressing domestic criticism that the U.S. has let global bodies push it around, he said the FSB “does not impose obligations, it addresses problems.”

He reiterated that support in Senate testimony Tuesday, arguing that “it’s very much in our national interest to try to ensure that our views are made known.”

Carney, who is also governor of the Bank of England, is leaving after serving two terms as FSB chairman. He took over in 2011 when Draghi, then governor of the Bank of Italy, became the ECB president.

Two other candidates have been in contention for the FSB job: Ravi Menon, managing director of the Monetary Authority of Singapore, and Bank of Italy Governor Ignazio Visco, according to the people with knowledge of the deliberations.

Spokespeople for the FSB, the Fed, the Italian and Dutch central banks and the Monetary Authority of Singapore all declined to comment.

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