WASHINGTON (4/16/14)--There may be room to strengthen capital and liquidity standards for large banks, Federal Reserve Chair Janet Yellen said in remarks made Tuesday.
Yellen's comments were broadcast through a video shown at the Federal Reserve Bank of Atlanta's 2014 Financial Markets Conference in Atlanta.
Current Liquidity Coverage Ratios (LCR) and Net Stable Funding Ratios (NSFR) do not address financial stability risks associated with so-called matched books of securities financing transactions, Yellen explained.
To address securities financing transactions and other residual risks in wholesale funding markets, Yellen said Fed staff is considering requiring firms to hold larger amounts of capital, stable funding, or highly liquid assets based on use of short-term wholesale funding.
These changes would likely apply only to the largest, most complex banking organizations, she noted. Other measures, such as minimum margin requirements for repurchase agreements and other securities financing transactions, could be applied to the market as a whole, she noted.
"There may be net social gains from introducing further reforms to address short-term wholesale funding risks," Yellen said, adding that the Fed is carefully examining the pros and cons of each option. Meetings like the Financial Markets Conference will be a vital part of the process as the Fed moves forward, Yellen emphasized.
For Yellen's full comments, use the resource link.