U.S. financial regulators are preparing contingency arrangements,
including travel restrictions and home-working, to ensure they can
effectively oversee the financial markets as the coronavirus closes in
on the U.S. capital.
On Friday, U.S. officials said the first three cases of the flu-like
disease had been diagnosed in Montgomery County, Maryland, home to
thousands of federal workers who travel in to offices in nearby
Washington daily.
Agencies including the Commodity Futures Trading Commission (CFTC),
the Securities and Exchange Commission (SEC), and the banking regulators
also have offices in New York, San Francisco and New Jersey where other
cases have been reported.
As New York banks start triggering their contingency plans, their
watchdogs have also begun to take precautions, allowing more
home-working, cancelling and limiting travel, calling off conferences,
and restricting some external meetings.
“The safety and health of CFTC employees is our top priority,”
Michael Short, director of public affairs at the agency said on Friday.
“The CFTC continues to make all necessary preparations to accommodate
scenarios that might arise.”
The derivatives watchdog has canceled some foreign travel and is
allowing essential overseas trips on a case-by-case basis, he said.
Domestic travel is still permitted, but staff are free to reschedule
trips unless it is mission-critical.
Likewise, the Federal Deposit Insurance Corporation said it had taken
steps to limit non-essential international travel. The Office of the
Comptroller of the Currency (OCC) said it had reviewed its contingency
plans, without elaborating.
On Thursday, the OCC along with the Federal Reserve and the FDIC
canceled a joint conference on fair lending scheduled for next week “out
of an abundance of caution,” they said.
Reuters also reported on Friday that the U.S. Federal Reserve had
taken the unusual step of quarantining U.S. dollars it receives from
Asia for up to 10 days.
A spokeswoman for the SEC said the agency was following government
advice that staff stay home when they are sick or when they have
returned from coronavirus hotspots.
“The agency also is focused on ensuring telework readiness and adjusting travel arrangements where appropriate,” she added.
JUGGLING
The coronavirus has spread to 85 countries, infecting more than
100,000 people, according to a Reuters tally based on statements from
health ministries and government officials.
U.S. Treasury debt yields plunged to historic lows on Friday, while
U.S. stocks tanked and the Dow Jones shed more than 800 points before
paring losses.
The U.S. Office of Personnel Management, which oversees federal
workers, trains federal agency staff annually on contingency plans for
disruptions like a lapse in funding or epidemic-type scenarios.
“The first level of planning is behind the scenes and to make sure
that you’ve got a contingency plan for anything and everything that can
happen,” said Thomas Vartanian, a George Mason law professor and former
senior OCC official.
Still, the market turmoil is adding to the regulatory workload,
requiring officials to ramp-up market monitoring, and communicate daily
with one another and the industry.
Short said the CFTC’s market intelligence team was providing multiple
daily briefings, while the OCC said it had stepped up scrutiny of banks
to ensure their plans are “relevant” and reflect a “comprehensive
understanding” of their specific risks.
The agencies are also grappling with other issues, including how
companies should disclose financial risks created by the virus, and
which trading and lending rules may need to be relaxed to accommodate
the disruption.
On Friday, the Fed said it was considering how it could encourage
financial firms to ease loan repayment terms for people adversely
affected by the virus. The central bank, alongside the OCC and FDIC and
other agencies, also on Friday issued updated contingency planning
guidelines to the industry.
Vartanian said regulators had to strike a balance between bolstering
confidence in system safeguards, without taking measures that could
actually increase market panic.
“Your job as a regulator is to make sure everybody has complete
confidence in the system, because if the confidence disappears, it
doesn’t matter what the crisis is.”
https://www.reuters.com/article/us-health-coronavirus-usa-regulators/u-s-financial-regulators-start-contingency-planning-as-virus-reaches-washington-idUSKBN20T2WH?il=0
