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Bank of England Governor Mark Carney steps down in December as
chair of the FSB, which has been coordinating a raft of new
rules for the Group of 20 economies since the global financial
crisis a decade ago.
Klaas Knot, president of the Dutch Central Bank, was also on the
shortlist for chair and will become the FSB's vice chair, in
line to succeed Quarles after three years, the sources said. The
arrangement has yet to be formally agreed, they added.
Quarles, who was appointed by U.S. President Donald Trump as the
Fed's first head of banking supervision last year, is seen as a
pragmatist on regulation. European countries hope that by
appointing Quarles, they will keep Washington fully engaged in
the body, the sources said.
"It's a compromise, a way of making sure that Klaas does not
completely lose," a regulatory source said.
"For the European members of FSB concerned about the commitment
of the United States, it's a way for them to ensure that part of
the leadership will be shared with a European."
Knot is also viewed as a pragmatist, but philosophically aligned
with conservative German positions on monetary and regulatory
policy.
Based in Basel, Switzerland, the FSB coordinates rules drafted
by three specialized global bodies: the Basel Committee, which
writes bank capital regulation, insurance watchdog IAIS, and
securities markets regulator IOSCO.
The FSB, the Fed and the Dutch Central Bank declined to comment.
STANDARDS
European regulators were alarmed when U.S. President Donald
Trump last year directed American regulators to review
post-crisis regulations with an eye to stimulating lending and
boosting the economy.
They feared that directive would bring the United States into
conflict with the FSB and other international bodies, as the
U.S. government went its own way on banking, trading and
insurance rules.
But the Fed under Quarles and Chairman Jerome Powell has largely
steered a moderate course, moving to refine and tailor
post-crisis regulations in line with firms' risk profile, rather
than tearing up the rule book.
While some congressional Republicans have accused the FSB of
being opaque and unaccountable, Quarles has defended the
institution. During a speech in June, he said the body continued
to play a key role in bolstering global financial stability by
propagating strong regulatory standards that also help protect
the U.S. system.
As the appetite among national governments for new financial
rules wanes, not just in the United States, the FSB is already
pivoting to reviewing rules it has introduced to make them more
effective and efficient.
But with some yet-to-be completed rules, such as those on
derivatives, and the rise of emerging technologies and
crypto-assets posing new risks, the FSB still has work to do to
safeguard the financial system, said Nicolas Veron, a senior
regulatory analyst at the Bruegel think tank in Brussels and the
Peterson Institute in Washington.
"This is not an institution that has lost its purpose right now.
There is a lot of unfinished business."
(Reporting by Huw Jones in London; additional reporting by Bart
Meijer and Toby Sterling in Amsterdam; Editing by Michelle
Price, Dan Grebler and Andrew Heavens)
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