In testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Randal Quarles, vice chair for supervision of the Board of Governors of the Federal Reserve System, is expected to report today that the strain in financial markets due to the COVID-19 pandemic “has eased,” but the “storm, however, is not over,” according to a copy of his prepared remarks released Monday.

“The strain in financial markets has eased, thanks to the actions of Congress, Executive agencies, central banks, and other private and public institutions around the world,” Quarles’ testimony states. “The profound economic disruption of the pandemic containment measures persists, and households and businesses are still deeply affected.

“Financial institutions now have an essential part to play in addressing that disruption — as a bridge between the start of this crisis and the completion of our economic recovery,” Quarles said.

Financial institutions will need to continue to work constructively with borrowers, offering them the flexibility “to weather a hardship they could not expect and did not create,” Quarles said, saying that banking organizations” can only be as robust as the economies they serve.”

As the response to public health concerns continues to unfold, Quarles said that the strength of the financial sector “will reflect and depend on the strength of the U.S. economy” and depend on “the calibration and effectiveness of our public health response.”

Quarles’ full testimony can be accessed on the Federal Reserve website. A report accompanying Quarles’ testimony also can be accessed on the Federal Reserve website.