Boston Fed President Asks for More Tools to Monitor Fintechs

Eric S. Rosengren, President and Chief Executive Officer of the Federal Reserve Bank of Boston, recently discussed the current state of the U.S. financial system, arguing that although there is stability, federal regulators needed more tools to monitor fintech firms. 

“We don’t have all the macroprudential tools that we might need in the future,” said Rosengren. “Ideally, financial stability is worried about risks wherever they are in the financial system, not just at the largest banks. So the coverage in the United States is quite limited.”

Rosengren used commercial real estate as an example. The Federal Reserve examines the risks of commercial real estate during its annual stress tests, but the largest U.S. banks are not overly leveraged in this sector. Rosengren argues that commercial real estate has moved on from big banks to small banks and fintech firms, resulting in risk transfer. The problem is that the federal reserve lacks the necessary tools and authority to monitor these financial institutions.

When asked about the biggest risk to the U.S. economy, Rosengren says that he has real concerns over commercial real estate, largely because of the increasingly larger role that fintech firms have in that sector.

“There are a lot of fintech players that are getting involved in commercial real estate, mortgages to individuals — a wide variety of activities that traditionally had been done by banks,” said Rosengren. “Commercial real estate something I’ve been worried about for some time – including, increasingly, the movement of commercial real estate to shared spaces with different kinds of institutional arrangements than we’ve seen in previous recessions.”

Nonetheless, it is unlikely that Congress will bestow more authority to monitor fintech firms on the Federal Reserve anytime soon.