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U.S. Treasury Secretary Janet Yellen is reviving a regulatory working group to study risks that hedge funds pose to the financial system, she announced Wednesday.

Yellen told regulators at the Financial Stability Oversight Council greater scrutiny was needed after the pandemic showed hedge funds can sometimes increase market instability.

“The pandemic showed that leverage of some hedge funds can amplify stresses,” she said, according to prepared remarks. “We are re-establishing the working group so that we can better share data, identify risks, and work to strengthen our financial system.”

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Yellen’s revival of the FSOC’s hedge fund working group, which the Trump administration had shuttered, is the latest sign the Biden administration could pursue stricter rules on the growing nonbank portion of the financial system.

The announcement came after the meltdown this week of leveraged hedge fund Archegos Capital Management, which inflicted losses on Credit Suisse, Nomura and other intermediaries.

She also announced she was directing an interagency review to determine if more needs to be done to address vulnerabilities within money market funds and open-end mutual funds, which also experienced stress during pandemic-driven turmoil, requiring government intervention.

The council, led by Treasury and including heads of the Fed, the Securities and Exchange Commission and other major financial regulators, met for the first time under Yellen Wednesday.

For the first time, the meeting included a public session to discuss financial system risks from climate change.

Archegos’ failure to meet margin calls is the third significant market episode in a year involving faltering hedge funds or open-end mutual funds.

Thus far, the damage from the Archegos incident has been limited to a handful of stocks, including ViaComCBS Inc and Discovery Inc, but concerns are rising that trillions of dollars in government coronavirus aid will fuel more market risk-taking.

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FSOC BACKTRACKED UNDER MNUCHIN

Former Treasury Secretary Jack Lew used the FSOC from 2014 to 2016 to focus on risks posed by hedge funds and asset managers, forming a working group to study their use of leverage. Yellen, an FSOC member as Fed chair, backed these initiatives.

Former President Donald Trump’s Treasury secretary, Steven Mnuchin, abandoned the working group. The FSOC also weakened rules on the designation of nonbank financial institutions as systemically important.

Yellen said at her confirmation hearing in January that she still thought leverage was worth studying, citing the market problem last March.

“This is an activities-based approach that FSOC is pursuing and I thought that was the right approach and I would want to look again at some of those approaches,” Yellen said.

Last week, Senator Elizabeth Warren, a Democrat and long-time critic of Wall Street, pressed Yellen on whether she would designate BlackRock Inc and other big asset managers as systemically important financial institutions.

Yellen said it was “important to look very carefully” at the risks posed by these firms, but again backed scrutiny of market activities over company-based designations.

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Mark Sobel, a former Treasury and International Monetary Fund official, said that Yellen, as FSOC chair, needs to make clear to regulators what “activities-based” supervision they should apply to hedge funds and asset managers.

Yellen “needs to use the bully pulpit of the FSOC to drill down on these issues and compel the relevant regulatory authorities to act,” Sobel added.

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