Monday, November 25, 2013

Fed's Tarullo details plans to counter bank runs

Fed's Tarullo details plans to counter bank runs
Posted By: Watchman
Date: Monday, 25-Nov-2013 09:45:48

Global regulators need more policy tools to counter the risk of devastating bank runs and should have powers over a wide array of market participants, U.S. Federal Reserve Governor Dan Tarullo said on Friday.
"There is a need to supplement prudential bank regulation with a third set of policy options in the form of regulatory tools that can be applied on a market-wide basis," Tarullo said at a conference on shadow banking.
He also detailed the Fed's plans to write new rules that would make it less attractive for banks to raise cash in short-term wholesale funding markets, a key factor in the collapse of Lehman Brothers in 2008.
Banks that substantially rely on short-term funding in the interbank market should be required to hold more capital on top of what is already mandated by international rules under the so-called Basel III pact, Tarullo said.
(Read more: The cost of regulation just topped $1 trillion: report)
Tarullo, who is the central bank's main policymaker on financial regulation, announced earlier this year that the Fed was working on a short-term funding rule.
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He said that international regulators should also consider ramping up capital requirements for matched books of repurchasing—or repo—agreements, which are a prominent part of the shadow banking system.
"Current versions of capital and liquidity standards do not deal with matched book issues," he said.
http://www.cnbc.com/id/101222045

 

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