Remarks as prepared for delivery

Good morning.  I’m pleased to be here today to welcome the members of the Market Risk Advisory Committee (“MRAC”).  I want to thank Commissioner Johnson for her sponsorship of MRAC and the staff for their work in organizing this meeting.

Market risk is never static.  The only thing that can be truly known is that there will be risk.  Where that risk arises is an area that must be closely monitored.  This includes both traditional areas of risk and emerging areas.

At the last MRAC meeting, I talked about areas of risk on banks, including risk related to changing interest rates, and risk related to an uncertain economic environment.[1]  Immediately after, we saw those risks manifest with the failure of Silicon Valley Bank, Silvergate Bank, and Signature Bank followed by government action to stop contagion to other banks and the broader economy.[2]  The bank failures were caused in part by a mix of traditional risks such as a failure of interest rate risk management and lack of diversification, as well as emerging risk.[3]  For example, the speed of online banking coupled with social media played a role in snowballing customer redemptions.  There was also exposure of certain banks to digital asset firms.

Market participants and regulators should remain nimble in how we think about market risk, how we monitor the risk, and ultimately how we promote market resilience.  Last month, when the Commission issued an Advance Notice of Proposed Rulemaking related to risk assessment, I called for us “to be forward looking to ensure that our risk management frameworks capture future risk as it could evolve or emerge.”[4]  Similarly, I hope that MRAC can help with that.

This is similar to prudential regulators.  Federal Reserve Board Vice Chair Michael Barr testified before the Senate how “recent events have shown that we must evolve our understanding of banking in light of changing technologies and emerging risks.  To that end, we are analyzing what recent events have taught us about banking, customer behavior, social media, concentrated and novel business models, rapid growth, deposit runs, interest rate risk, and other factors, and we are considering the implications for how we should be regulating and supervising our financial institutions.  And for how we think about financial stability.”[5]

The CFTC should do the same.  I am interested in hearing from MRAC members about how they are being nimble in their assessment of risk—both traditional risk and emerging risk.  I am also interested in MRAC members’ views on how the Commission can be nimble in its assessment of risk, and also ultimately how to promote resilience.

I look forward to today’s discussion, and thank you for your service.