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

In Response To: Just In Case You Still Have A Bank Account--Banks Say They Must Soon Charge YOU Interest.... (Watchman)

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. Play Video Biggest risk is regulatory environment: UBS's Orcel Andrea Orcel, CEO of UBS Investment Bank, says tough regulation could cause headwinds to the business in the future. 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