Threats to US financial system stay elevated

WASHINGTON — The nation’s top financial regulators told Congress on Friday that threats to U.S. financial stability remain elevated even though the country has recovered from what appears to be the worst economic shocks from the pandemic.

In its annual report on threats to the economy, the Financial Stability Oversight Council highlighted for the first time climate change as an emerging risk, citing among other things potential loan losses from floods and forest fires.

The Biden administration has made climate change a top priority, reversing the decision by the Trump administration to pull the United States out of the Paris climate agreement.

The council is chaired by Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and the heads of other regulatory agencies including the Securities and Exchange Commission, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

The council was created by Congress in 2010 to address gaps in coordination among financial regulators that were exposed by the 2008 financial crisis.

Yellen, speaking before the panel approved the report Friday, said the turmoil that first enveloped financial markets in March 2020 after COVID-19 hit had been dealt with quickly by the Federal Reserve and other agencies. She said the response showed that the “financial system is far more shock resistant” than it was when the 2008 crisis struck.

The council report listed cybersecurity as another emerging threat, saying more needs to be done to protect financial institutions from malware attacks and data breaches.