The Financial Stability Oversight Council has relaunched its hedge funds task force.
At the request of Treasury Secretary Janet Yellen, who leads the FSOC, the council will reconvene its hedge fund working group for the first time since 2016. "We are re-establishing the working group so that we can better share data, identify risks and work to strengthen our financial system," Ms. Yellen said at Wednesday's FSOC meeting, according to a transcript posted on Treasury's website.
During the meeting's executive session, the council heard an update from the Office of Financial Research about hedge fund activities during the market stresses in March 2020, "including the relationship between hedge funds' deleveraging and price declines in certain financial markets," Treasury said in a statement.
"The pandemic showed that leverage of some hedge funds can amplify stresses, too," Ms. Yellen said.
She also said the council needs to look ahead and prepare for emerging risks, like climate change.
"It is an existential threat to our environment, and it poses a tremendous risk to our country's financial stability," Ms. Yellen said. "We know that storms will hit us with more frequency and more intensity. We know warming temperatures might disrupt food and water supplies, leading to unrest around the world. Our financial system must be prepared for the market and credit risks of these climate-related events."
But, she added, the council must also prepare for the country's transition to a net-zero carbon economy, which "also creates potential challenges for financial institutions and markets."
Wednesday's gathering was the first FSOC meeting led by Ms. Yellen.
