Liz Truss looks out of place. In her neat pink jacket and white blouse, the former U.K. prime minister, who served a brief but eventful 49 days in the role back in 2022, strikes a contrast to the hoopla around her in the packed ballroom. Truss has come to Liberty University in Lynchburg, Virginia this October evening for the yearly “CEO summit,” drawing corporate figures, conservative influencers and donors for a night of fiery speeches about the triumphs of the MAGA movement — seasoned with the university’s Christian conservative tradition of mixing politics with prayer. Truss rises somberly as the crowd is enjoined to repent, soul-search and double down on tithe payments to the Baptist mega-church originally founded by the late televangelist Jerry Falwell. From the stage at the front of the room, she nods along to the heady mixture of God and politics, waiting to start a talk about the so-called “deep state” — which, she claims, includes the Bank of England and the U.K. Treasury. She announces that she is “on a mission” to transform the U.K., and when someone cries a noisy “amen,” that throws her for a moment before she resumes. If the juxtaposition between the ex-prime minister and fire-and-brimstone MAGA evangelicals seems unlikely — Truss later tells me she is still a stalwart of the Church of England, which is much more establishment than evangelical, even if she thinks it has gone a bit “woke” on social issues like trans rights — her presence here nonetheless represents an increasingly popular trend. A transatlantic “Magafication” movement is luring traditional conservatives from the U.K. to identify with the provocative style of U.S. President Donald Trump — and to try their hands at imitating him on his home turf, participating in rousing conservative speaking events across the U.S. For some, like Truss, these events are a lucrative, mood-enhancing chance to establish a new identity after the stinging defeat of the Tory party at the last general election in July 2024. For her more charismatic predecessor Boris Johnson, they are a chance to hear the roar of the crowd that more sedate speaking gigs with hedge funds and law firms can’t deliver. For Nigel Farage, from the ultraconservative Reform UK party, they are a chance to re-forge British politics in the image of Trump — a benediction and a bro-mance all in one. Whether it’s connecting with voters on either side of the Atlantic, however, is a less certain proposition. Most of the students going about their early evening outside the hall don’t seem to know who Truss is. “They kind of told us she was the leader in the U.K.,” muses one business studies major, “but I never heard of her.” Just a few weeks earlier, it was Johnson — the premier who rose on the wings of Brexit and preceded Truss in a carousel of Tory leaders after the Leave vote — who spoke on campus at the new-term convocation, following a sequence of Christian rock numbers.  “We’re in a congregation, folks, convocation — I mean, we’ve been convoked,” Johnson riffed. The ruffle-haired charm and Old Etonian levity were a preamble to a speech about the Christian university as a “bastion of freedom” and a paean to the memory of Charlie Kirk, the murdered conservative activist, whom Johnson hailed as “a martyr to our inalienable right as human beings to say what is in our hearts.” Later, he zoned in on the need to keep supporting Ukraine and lambasted the authoritarianism of Russian President Vladimir Putin — to a muted response from the audience. It’s not exactly a popular take here; there are no follow-up questions on the topic. And at the CEO event, none of the speakers mention Ukraine or the U.S. role in its future at all. Much like the isolationism Johnson encountered, the British MAGA trail is a sign of the times. Trump’s twofold electoral success is attractive to some U.K. conservatives who feel there must be something in the president’s iconoclasm they can bottle and take home. And unlike tight-lipped debate forums in the U.K., such events give them a chance to be noisy and outspoken, to paint arguments in bold and provocative colors. In other words, to be Brits on tour — but also more like Trump. And, for added appeal, these tours are a lucrative field for former inhabitants of 10 Downing Street. One person who has previously worked at the Washington Speakers Bureau, one of the main hubs for booking A-list speakers, said that the fee for a former premier is around $200,000 for a substantial speech, plus private plane travel and commercial flights for a support team. That is a level of luxury unparalleled at home. Well known figures like Johnson and David (Lord) Cameron, the British premier from 2010 to 2016, can aim even higher if travel is complicated. -------------------------------------------------------------------------------- Having “former prime minister” in front of your name in writing may open a lot of doors, but these politicians nonetheless have to tailor their resumes to appeal to American audiences.” Political CVs are duly bowdlerized to appeal to the target market of U.S. institutions and interests. Johnson’s profile at the Harry Walker agency in Washington, for instance, stresses his interest in deregulation and claims that he “successfully delivered Brexit — taking back control of U.K. law, marking the biggest constitutional change for half a century and enabling the United Kingdom to generate the fastest vaccine approval in the world.” This sequence of events and superlatives is debatable at best. Failures are routinely airbrushed out — Johnson’s premiership crashed in a mess of mismanagement during the pandemic and party divisions unleashed by the Brexit vote and his controversial handling of the aftermath, including the temporary dissolution of parliament to push through his legislation. But for characters whose legacy at home is either polarizing (like Johnson) or more likely to elicit a sly British eye roll outside a small fan base (Truss), there is also a degree of absolution on the American performance circuit that feels refreshing, in the same way that U.K. Indie bands stubbornly try to conquer America. Neither of the former Conservative leaders however, have as much to gain or lose by speaking at Trump-adjacent events as Farage, the leader of Britain’s Reform party — an “anti-woke,” Euro-skeptic, immigration-hostile party that is leading in the polls and attempting to expand its handful of lawmakers in the House of Commons into a party in contention for the next government. Farage has the closest access to Trump — a status previously enjoyed by Johnson, who last met Trump at the Republican National Convention in 2024 to discuss Ukraine. Proximity to Trump is the ultimate blessing, but it’s far harder to secure out of office than in it. Johnson endorsed Trump’s comeback at CPAC in February 2024 and wrote a column in support of Trump’s attack on the BBC for splicing footage of the January 6 uprising, which was deemed to be misleading and led to the abrupt departure of the broadcaster’s director general. Johnson was at Trump’s inauguration along with Truss (no other former U.K. politician was asked), but the invitations appear to have dropped off since chummy relations in Trump world can be ephemeral. Farage, by contrast, is a frequent visitor at both Mar-a-Lago and the White House. On November 7, he joined Trump at a fundraising auction for military veterans and has arranged to donate the prize of a walk with a centenarian veteran on Omaha beach, commemorating the D-Day landing site for U.S. forces. “I see him often,” he told me of his visits to Trump. Farage’s relationship with Trump could prove advantageous to him if he and his party claim greater power at home. He’d have the ear of the president, perhaps even the ability to sway Trump into a more sympathetic stance toward the U.K., even as the Americans embrace a more isolationist foreign policy. For now, Farage is certainly the most in-demand Brit on the MAGA circuit. He was the main speaker at the $500-a-head Republican party dinner in Tallahassee, Florida in March. Guests paid around $25,000 for a VIP ticket, which included having a photograph taken with the Reform UK leader. For the leader of a party that has a skimpy presence in parliament and faces the challenge of keeping its surge momentum and newsworthiness intact on a long road to the next election, being in the Trump limelight is a vote of confidence and a sign that he is taken seriously across the pond. The quid pro quo is performative loyalty — Farage, by turns genial and threatening in his manner, has echoed the president’s rancorous tone toward public broadcasters and media critics of MAGA. -------------------------------------------------------------------------------- All of this transatlantic networking has threatened to ensnare the British visiting troupe in ethical quagmires about how their lucrative American freelancing relates to duties and strictures at home. Farage has attracted envious attention among his peers in parliament for earning around $1.5 million a year in addition to his MP salary, but he was forced to apologize recently for failing to declare the March dinner appearance and any fees associated with it in the official registry. So far, he’s revealed only that the trip was “remunerated in three separate installments over the course of two months,” without naming the funder.  Even Farage’s friendship with Trump — the envy of his compatriots on the MAGA trail — could present vulnerabilities among the U.K. electorate. Farage’s base of Reform voters largely supports Trumpian stances on immigration and diversity, and they love Trump’s personality. But beyond core Reform voters, the president does not enjoy broad support in the U.K. Recent polling shows only 16 percent of British people like the president. That’s a challenge for the Reform UK leader, whose party polls at just under 30 percent support in the U.K.; he needs to reach Trump-skeptical voters beyond his base in order to claim power. On top of those liabilities, avid Christian nationalism of the kind Truss encountered at the Liberty event presents a cultural problem for British politicians. Mixing ideology with religious fervor is awkward back home where church-going is largely regarded as a private matter, even if there are signs of more evangelical commitment among influential Christian Conservatives like Paul Marshall, a hedge-funder who recently acquired The Spectator, the house publication of well-heeled Tories, expanding its digital reach into America. Hardline evangelical stances could undermine support for campaigners like Farage, says Tim Bale, an expert on elections and political trends at Queen Mary College, University of London. Farage “probably needs to be careful of getting into things like anti-abortion arguments or even term limits on abortion. That does not play in the U.K.,” he told me. Duly, on their U.S. pilgrimages, both Truss and Johnson side-step direct engagement with the religiosity of their hosts. Johnson, who once joked that his own Anglican faith “comes and goes like Classic FM in the Chiltern hills,” basks in his reputation as a cheerful libertine with an array of past wives and mistresses. He fathered one child by an affair, and a scandal arising from allegations that he paid for an abortion during another affair got him sacked from his party’s front bench in 2004. (Johnson married his current wife, with whom he has four children, in 2021.) Religion isn’t the only subject that makes British MAGA-philes modulate their tone toward Trump. Johnson spoke of Trump’s “boisterous and irreverent” treatment of journalists, but dismissed it as minor compared to the attacks on the fourth estate in Moscow. Despite her previous support for Ukraine as Johnson’s foreign secretary, Truss awkwardly ducked questions on the Westminster Insider interview podcast when I pressed her about whether the administration should send Tomahawk missiles to Ukraine, which Trump opposes. “I’d have to know about the facts on the ground,” she said. But Farage, Johnson and Truss are betting that the benefits of being a transatlantic Trump acolyte well outweigh the risks. And there might be more to it than personal vanity tours and cushy earnings. The sense of grievances unheard or unaddressed that first elevated Trump to power have echoes across the Atlantic: worries about national decline, a feeling that traditional parties have lost touch with voters and a capacity for making Barnum-style entertainment out of the business of politics. It is a long way from being interrupted by the Speaker of the House of Commons shouting, “Order, order!”- Whether it is a flattering transatlantic afterlife for fallen leaders or a precursor to pitch for power at Westminster for Farage (who tells me that, like Trump, he is “building an unstoppable movement”) the MAGA circuit is the place to be — even if it’s not where everybody knows your name. It is also about embodying something these political pilgrims reckon their rivals fail to grasp: namely, the way one man’s MAGA movement has redefined Conservatism and opened up space for imitators in Europe to identify with more than their own election flops — and for newcomers to seek to remake their own political landscape. After all, if it happened to America, it might turn out to be a bankable export.

Hungary’s surging opposition is demanding Prime Minister Viktor Orbán explain a “bailout package” he hinted at securing from U.S. President Donald Trump.   Orbán, a longtime Trump ally, traveled to Washington last week to meet with the American leader. As he returned to Budapest, the populist-nationalist Hungarian premier told his delegation the U.S. had agreed to provide Budapest a “financial shield.” “Certain Brussels instruments that could be used against Hungary can now be considered ineffective … The notion […] that the Hungarian economy can be strangled from the financing side, can now be forgotten,” he said, according to local media, adding, “We have resolved this with the Americans.”  After 15 years in charge, Orbán faces potential defeat in next spring’s national election — and the specter of financial assistance from Washington closely echoes Trump’s recent blockbuster move to save another ideological ally, Javier Milei in Argentina. Orbán’s remarks, which allude to EU money due to Hungary but frozen because of concerns about backsliding on the rule of law, triggered questions Monday from Péter Magyar, leader of Hungary’s opposition, which is leading the ruling Fidesz party in the polls. “Why was such a ‘financial shield’ necessary? Is there a near-state bankruptcy situation? What would Viktor Orbán spend the trillions of forints in American loans on? Why is he indebting his fellow citizens instead of bringing home the 8 trillion forints in EU funds owed to Hungarians?” Magyar demanded in a post on social media. In a separate missive, he added, “Why did Orbán secretly negotiate a huge bailout package?”  EU ESTRANGEMENT Hungarian media outlet Válasz Online reported that Trump and Orbán may have committed to a currency swap between their countries’ central banks — similar to the $20 billion exchange-rate stabilization agreement Argentina inked with the U.S. last month — essentially, a bailout package for Budapest.  If so, it would be the second time Trump provided financial assistance for a right-wing ally ahead of a crucial election, after he approved the bailout package for Milei, the chainsaw-wielding libertarian president of Argentina. That intervention, organized by Treasury Secretary Scott Bessent, included direct U.S. purchases of Argentine pesos and a $20 billion currency-swap agreement giving Buenos Aires access to dollars. Bessent also announced plans to marshal an additional $20 billion in private financing, though that money has yet to appear. There are differences, too, though, which make any Washington-Budapest arrangement more difficult to understand. Hungary’s central bank does not have dollar swap arrangements with the U.S. Federal Reserve, nor does Hungary have a formal backstop — basically, an agreement to help financially in times of fiscal disaster — with the Fed.  By contrast, it does have a swap arrangement for euros with the European Central Bank, and it could also turn to the International Monetary Fund if the ECB were unable, or unwilling, to help. Spokespeople for the White House and U.S. Treasury didn’t immediately respond to a request for comment. Donald Trump’s relationships with Budapest and Buenos Aires reveal clear parallels. | Roberto Schmidt/Getty Images Much of this is currently academic because Hungary is, to put it mildly, in a far better economic position than Argentina — it doesn’t even need a bailout. Hungary, like many EU countries, has weak growth, but the main threats to its financial stability under Orbán’s leadership relate to the potential for estrangement from the EU. ARGENTINA PARALLELS The U.S.’s Argentina intervention was a success, politically, for Milei, whose party won a decisive victory on Oct. 27 in midterm elections allowing him to press ahead with his radical economic overhaul of the country. Trump celebrated the outcome, saying the effort had “made a lot of money for the United States.” Bessent likewise said the U.S. investment had “turned a profit.” But the administration has released no details about the full scope of U.S. involvement or the returns it claims to have earned. Trump’s rescue package has drawn political backlash in the U.S. from both Democrats and even some Republicans, who blasted the administration’s assistance for Argentina as a bailout for a political ally that may boost wealthy hedge funds while risking U.S. taxpayer dollars on a chronically bankrupt country. Bessent said the Argentina intervention was aimed at countering China’s growing clout across Latin America and, more broadly, reasserting American economic power in the Western Hemisphere, comparing the U.S. effort in Argentina to an “economic Monroe Doctrine.”  Trump’s relationships with Budapest and Buenos Aires reveal clear parallels, and an effort to prop up key partners in regions where many leaders are not naturally allied with the U.S. president’s MAGA agenda. The White House also sided with Orbán over the Hungarian leader’s refusal to stop purchasing Russian oil despite a European push to wean off Moscow’s exports, exempting Hungary from U.S. sanctions on Russian energy for one year following his meeting with Trump. Further financial backing from Washington could embolden Orbán, a frequent thorn in the EU’s side, to take even stronger anti-Brussels positions. Seb Starcevic reported from Brussels. Michael Stratford reported from Washington, D.C.

LONDON — Nigel Farage’s second-in-command called for a rethink of the U.K.’s interest rate-setting committee in a fresh sign that a Reform UK government could intervene in Britain’s independent central bank. Richard Tice, the deputy leader of the populist-right party that’s surging in U.K. polls, told POLITICO in an interview that there should be a debate over potentially sweeping changes to the make-up and role of the Bank of England’s Monetary Policy Committee (MPC).  “It’s not unreasonable to check whether or not we’ve got the membership of the MPC right. I mean, it’s almost 30 years,” he said, referencing the 1997 establishment of the MPC. “So you could say, well, have we got the membership right? Have we got the number of government representatives right? Should they or shouldn’t they have a vote? Have we got the mandate right?”  He added: “Should it have a growth mandate? We should have that debate.”  The BoE’s rate-setting committee is made up of nine members, including Governor Andrew Bailey, four senior central bank executives, and four independent external members appointed by the chancellor. A representative from the U.K. Treasury joins MPC meetings but is not allowed to vote.   Monetary policy has become increasingly politicized since the Covid-19 pandemic, after which inflation soared to double digits and the BoE raised rates to their highest levels in 15 years. The International Monetary Fund has warned the U.K. faces the highest inflation in the G7 this year and next.   Tice’s comments come ahead of a speech in the City of London Wednesday, where he is expected to set out a wide-ranging aspiration for financial services deregulation should Reform UK enter government in Britain’s 2029 general election. The deputy leader said the U.K. needs a “complete sea change” in how risk is approached in the City, and called for further red tape cutting on banks, hedge funds and other City giants. “No one’s stepping back and asking big, philosophical questions,” he said.   Tice told POLITICO his party is “happy” with the BoE’s independence, but said it is “ridiculous” that “no one dares to” question the performance of the central bank despite the U.K. “outsourcing all responsibility for massive issues that affect ordinary people.”  He argued the BoE had “failed” under Conservative Liz Truss, who was forced out as prime minister after bond yields spiked in the wake of a tax-cutting budget, leading banks to increase their lending rates. Tice accused City regulators of “missing” the issue of liability-driven investments (LDIs), which increased the strain on pension funds during that period, and said the Bank of England “could have actually stepped in and prevented the carnage.”  Truss has repeatedly blamed the Bank of England for failing to anticipate the market consequences of her budget. The central bank intervened after her mini-budget to calm the markets by implementing an emergency bond buying scheme.  WIDER REFORM Reform leader Farage, who is set to give a speech in the City Monday on his broader vision for the economy, has gone further, saying Bailey has “had a good run” and he “might find someone new” if the party wins the next election.  Bailey’s term is due to end in 2028, before the election. Tice did not rule out the prospect of a Reform government forcing out an underperforming central bank governor in future, saying: “At the end of the day, any public official has to be accountable for their performance.”  However, he declined to liken Reform’s stance to Donald Trump’s approach to the Federal Reserve, after the U.S. president repeatedly attempted to get rid of chair Jerome Powell.  Reform UK is currently ahead in the polls, as Britain’s Labour government continues to struggle with its messaging on the economy, immigration and frustration within Prime Minister Keir Starmer’s top ranks. Reform leader Nigel Farage, who is set to give a speech in the City Monday on his broader vision for the economy. | Mark Kerrison/Getty IMages Tice argued Labour — which has made growth its primary objective by rolling back 2008 financial crisis legislation — is adding rather than removing regulation, and accused it and the opposition Conservatives of “tinkering around the edges.”  “We’re not going to create any form of meaningful growth under the current trajectory of this government, or under the trajectory of any Conservative plans,” he said. “We are heading towards impoverishment and growth has relentlessly declined as borrowing has relentlessly increased, particularly if you look per head. And it requires a complete sea change in the way that we think about risk and reward.”  Asked whether a Reform government would go further than Labour on deregulation, Tice said: “Yes. We want to ask some very big questions about how we do things.”  Tice also argued that regulators such as the Financial Conduct Authority — which Farage hopes to strip of its role regulating banks — have “utterly failed to do their job.”  Asked if he believes Britain has now moved on enough since the 2008 financial crisis to strip away “protections,” he replied: “There are all sorts of different reasons why the ’08 crash happened. But we supposedly had all the mechanisms of protection there, and they failed. No one was properly held to account.” 

Warning signs from an obscure part of the financial markets have got policymakers rattled, and one of their oldest and most profound fears may be about to get very real. As the world’s top central bankers and finance ministers descend on Washington for the annual meetings of the International Monetary Fund and World Bank, signs are increasing that the next bout of financial instability may be around the corner. The most worrying signs are arguably not from the foreign exchange market, where confidence in the dollar — the global system’s anchor — is gradually eroding, nor from the stock market, where the AI frenzy has driven equities to record highs in the U.S. and Europe. Rather, it’s what’s happening in the credit markets that’s sending a shiver down the spine of all those who remember 2008. The collapse of U.S. auto loan dealer Tricolor and parts supplier First Brands Group hints that something may be wrong in the world of private credit. Private credit refers to loans that are neither issued by banks nor publicly traded on an exchange like corporate bonds. It’s a broad description, and it can refer to anything from the aforementioned car loans issued by special credit suppliers to private funds lending money to help buy a family-owned company or financing for a new apartment block. It’s a young market, but has grown at breakneck speed. Goldman Sachs estimates it’s worth $2.1 trillion, and private equity companies, in particular, have made a fortune from it, helped by a vast amount of leverage. Because the money isn’t lent by banks, and because it’s structured as a private deal off the public markets, it’s a corner of the financial ecosystem that’s particularly hard to oversee — even when, as with Tricolor, the loans are then repackaged into tradable bonds. That means that if something is going disastrously wrong, it might only be detected once it’s too late. Officials are alarmed that something like that might be happening. For years, banking regulators have congratulated themselves on stamping out the kind of excessive risk-taking, questionable ethics and shoddy governance that caused the last financial crisis. But all along, they have fretted that, far from being dead, such behavior had just moved to other parts of the financial system outside their reach. In a speech last week, European Central Bank President Christine Lagarde warned that it was “imperative” to improve transparency in the non-bank financial sector, whose assets are now bigger than those of the regulated banking sector. “Policymakers must do so sooner rather than later,” she said. The Bank of England also took up the theme earlier this week, its Financial Policy Committee warning that “the risk of a sharp market correction has increased.” It said the defaults in the U.S. “underscore some of the risks the FPC has previously highlighted around high leverage, weak underwriting standards, opacity, and complex structures.” THE WHEELS COME OFF Texas-based Tricolor was an auto loan provider that lent to riskier clients, notably undocumented migrants. First Brands, meanwhile, is a car parts supplier that used opaque and complex financing schemes to pay its suppliers — until it wasn’t able to anymore. One of its creditors, Raistone, alleges that some $2.3 billion that it was owed “simply vanished.” Shares of investment bank Jefferies tumbled this week after it declared it had $715 million in exposure to First Brands. Swiss giant UBS, meanwhile, says it has $500 million at risk. The big question is whether the twin bankruptcies — concentrated in an inherently riskier segment of the market — are just two accidentally similar one-offs, or whether they are the first signs of a broader crisis brewing. Credit rating agency Fitch said defaults in the private credit market rose to 5.5 percent in the second quarter of the year, up from 4.5 percent in the first quarter. Meanwhile, in January, Fitch said auto loan payments that were 60 or more days late among the least creditworthy (subprime) borrowers were at the highest level on record, at 6.6 percent. A growing body of academic literature has found extensive links between non-bank financial institutions (NBFIs) — a category that includes hedge funds and private equity, as well as private credit — and the traditional banking sector. “Through these linkages, shocks can propagate rapidly across entities, sectors, or jurisdictions, especially when multiple institutions respond simultaneously to market stress,” said the authors of a paper at this year’s ECB research conference in Sintra, Portugal. They wrote that nearly one tenth of banks’ assets in the European Union were claims on NBFIs, and that 10-15 percent of banks’ deposits also came from non-banks. Loriana Pelizzon, deputy scientific director at the Leibniz Institute for Financial Research and one of the authors of the paper, said she wasn’t overly concerned about the two bankruptcies, given the relatively small size of the auto financing market. However, she said that interlinkages between European NBFIs and the U.S. financial system needed to be monitored, given the scale of the investments. “There’s a significant amount — trillions and trillions invested — in the U.S.,” she said, noting that investment chains are often long and complex, and that regulators lack insight into them. “The question is whether this is just a couple of rotten apples,” said Davide Oneglia, director at economic consultancy TS Lombard. He said that the risk in the private credit segment will grow further if U.S. interest rates don’t fall as quickly as expected, for example, due to high inflation. That would put a further squeeze on private credit providers. IN PLAIN SIGHT But it’s not just private credit that has policymakers on tenterhooks. The benchmark U.S. stock index S&P 500 is now trading at nearly 30 times the expected earnings of its components, far above its long-run average, and closer to the freak levels seen during the Dotcom boom and the pandemic. Over the last three years, the S&P has risen over 80 percent, largely powered by the performance of U.S. tech stocks on the back of a boom in AI investment. Companies have invested some $400 billion to build out the infrastructure — microchip factories and data centers — that powers AI. Should that money turn out to be misspent, for example, if AI doesn’t provide the productivity gains that investors are betting on, that bubble will burst with painful consequences. In parallel, unbridled government spending throughout the developed world, from the U.S., to Europe and Japan, have pushed market interest rates higher, amid growing doubts that governments can ever repay the debts they are building up. That has also helped push the price of gold — seen as a safe asset that won’t lose value — higher, with some investors piling into both gold and Bitcoin to avoid the debasement of their investments through inflation. It’s not clear which of these — if any — will light the wick of the next global financial meltdown. But what is clear is that policymakers will have no shortage of threats to obsess over next week.

Investment funds that have expanded into the lending business need to be regulated more tightly before they can cause another financial crisis, European Central Bank President Christine Lagarde said on Friday. “It is imperative to extend oversight to non-banks involved in bank-like activities, or with significant links to the banking sector — and policymakers must do so sooner rather than later,” Lagarde said in a speech in Amsterdam to mark the retirement of Klaas Knot, former chair of the Financial Stability Board. Lagarde said that the passage of time since the last great financial crisis had dulled the alertness of policymakers to risks building up in the system. These risks are now carried by a variety of hedge funds and credit funds, rather than by the traditional banking sector, mainly due to the fact that it was banks, rather than investment funds, that bore the brunt of the wave of regulation that followed the 2008 crisis. Lagarde said this had created an uneven playing field between banks and non-banks, and acknowledged the “regulatory fatigue” that has motivated banks to press for a lighter regime. However, she said that the answer was not to reduce regulation on the former, but rather to level it up, by applying tighter standards to non-banks. “Preventing instability is always less costly than repairing the damage afterwards,” Lagarde warned, noting that the burden of repairing the damage tends to fall on the central bank.

U.S. Senator Elizabeth Warren has called for a former Trump-appointed banking regulator to be dismissed from the global financial watchdog, warning he is putting the world’s economic stability at risk. Randal Quarles, who was vice chair of supervision at the U.S. Federal Reserve from 2017 to 2021 where he oversaw a wave of deregulation, was last month chosen to lead a worldwide review of post-2008 financial crisis reforms for the Financial Stability Board. In a letter addressed to FSB Chair Andrew Bailey, obtained by POLITICO, Warren blamed Quarles’ deregulatory measures for the collapse of three U.S. banks including Silicon Valley Bank in 2023 and warned he would bring the same mindset to global standards. “Mr. Quarles spent his tenure as a top financial regulator in the United States weakening safeguards for megabanks at the expense of financial stability and the American public,” said Warren, a former U.S. presidential hopeful who is the most senior Democrat on the Senate banking committee. “It would be deeply troubling if this FSB review became a mechanism to coordinate the easing of post-2008 rules across the globe.” She said Quarles’ background “demonstrates that he is the wrong person to lead such a review.” She called on Bailey to “consider terminating the appointment and conduct your own search for a suitable replacement.” Bailey, who is governor of the Bank of England, became FSB chair after Quarles’ appointment. The warning came as the FSB, a global body that monitors and coordinates national financial regulations, issued new guidance on the regulation of nonbank financial groups, such as hedge funds. The guidance recommended capping the amount of borrowing these groups can do, but left up to national regulators to determine the details. ROLLING BACK SAFEGUARDS In the years following the 2008 global financial crisis, countries clubbed together and tasked the FSB with coordinating national regulators to prevent a similar crisis happening again. But in 2017, with momentum shifting back to deregulation, newly-elected U.S. president Donald Trump nominated Quarles to head up the Fed’s banking supervision arm. Warren’s main criticism of Quarles relates to his implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which gave the Fed discretion to apply tougher regulatory standards to large banks with assets of between $100 billion and $250 billion. “Under the law, Mr. Quarles had discretion to apply these rules … [but] he and other Trump-installed regulators refused to do so,” she said. She said Quarles also led the rollback of rules prohibiting banks from making “risky proprietary bets with customer deposits and from investing in or sponsoring hedge funds or private equity funds.” Both of these contributed to the collapse in 2023 of Silicon Valley Bank, she said. As well as calling for Quarles’ termination, the letter asks whether his appointment is an indication that the FSB sees “this review as an opportunity to coordinate the easing of post-2008 financial safeguards.” Neither Quarles nor the FSB immediately responded to a request for comment.