Janet Yellen, chair of the U.S. Federal Reserve, speaks during the 2014 National Interagency Community Reinvestment Conference (NICRC) in Chicago, Illinois, U.S., on Tuesday, Jan. 25, 2011. Photographer: Daniel Acker/Bloomberg *** Local Caption *** Janet Yellen Janet Yellen, chair of the U.S. Federal Reserve, speaks during the 2014 National Interagency Community Reinvestment Conference (NICRC) in Chicago, Illinois, U.S., on Tuesday, Jan. 25, 2011. Photographer: Daniel Acker/Bloomberg *** Local Caption *** Janet Yellen
Washington - Additional capital might be required for large US banks whose source of funding could be at risk during a financial crisis, Federal Reserve chairwoman Janet Yellen has said.
A study by the Basel Committee on Banking Supervision “provides some support for the view that there might be room for stronger capital and liquidity standards for large banks than have been adopted so far”, Yellen said yesterday.
Yellen said staff members at the Fed “are actively considering additional measures that could address these and other residual risks in the short-term wholesale funding markets”.
Some “measures – such as requiring firms to hold larger amounts of capital, stable funding, or highly liquid assets based on use of short-term wholesale funding – would likely apply only to the largest, most complex” banks.
Yellen was particularly concerned that reforms should ensure liquidity because “in 2007 and 2008, short-term creditors ran from firms such as Northern Rock, Bear Stearns and Lehman Brothers, and from money market mutual funds and asset-backed commercial paper programmes”.
“These runs were the primary engine of a financial crisis from which the US and global economy have yet to fully recover,” she said. – Bloomberg