Member access

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 

Fed's Tarullo : Central Banks Should Consider Role of Financial Stability

02/22/2013 | 08:00pm US/Eastern

(Adds comments from question-and-answer session in last two paragraphs.)

 
   By Michael R. Crittenden 
 

Central bankers should consider what role financial stability should play when making monetary-policy decisions, both in preventing and responding to crises, Federal Reserve Gov. Daniel Tarullo said Friday.

Speaking in New York, Mr. Tarullo suggested there was "ample justification" for central bankers to consider financial stability when making decisions about monetary policy because of the large-scale effect a financial crisis can have on growth and unemployment.

"We need to consider carefully the view that central banks should assess the effect of monetary policy on financial stability and, in some instances, adjust their policy decisions to take account of these effects," he said in a speech.

Mr. Tarullo, the Fed's point man on financial regulation, also reiterated concerns he has expressed previously about oversight of the so-called shadow-banking system. While regulators have made progress on addressing the problem of "too-big-to-fail" firms, efforts to address risks posed by short-term funding markets have lagged.

"Except for the liquidity requirements agreed to in the Basel Committee, however, the liability side of the balance sheets of financial firms has barely been addressed in the reform agenda," Mr. Tarullo said.

He laid out a laundry list of international regulatory efforts he expects to see completed or having had progress in the coming months, expressing confidence regulators will be able to finalize efforts to impose capital surcharges on systemically important banks. Regulators should also finish work within the next six months on designating systemically important nonbanks, such as insurance companies, he said.

One area where he urged caution, however, is a liquidity rule known as the "net stable funding ratio" that has been in a state of limbo as regulators decide whether to press forward with the changes. Intended to keep banks from relying too heavily on short-term funding to help finance longer-term loans, the rule has been criticized by the banking industry.

Mr. Tarullo said more analysis should be done before the rule is finalized.

"I think we may be better advised to take the opportunity of this review to examine whether there are approaches that might address more directly the vulnerabilities for the financial system created by large nondeposit, short-term funding dependence at major financial institutions," he said.

In response to a question from an audience member at an event sponsored by Cornell University's international law journal, Mr. Tarullo said central bankers face a challenge of balancing policy remedies to a systemic strain when the economy itself is still fragile.

"We're still in a slow-growth environment" in the U.S., Mr. Tarullo said

--Christian Berthelsen contributed to this article.

Write to Michael R. Crittenden at michael.crittenden@dowjones.com

React to this article
Latest news
Date Title
04:44p MIZUNO : Yakult 10-Miler slated May 24 registration on
04:26pDJGreece's Fate Lies in Athens' Hands, Not Berlin's
04:13pDJFacebook Woos Chinese Advertisers
04:08p Greek reform list yet to take shape as talks with lenders continue
04:01p FORD MOTOR : E4OD Ford Rebuilt Transmissions Now Discounted for Sale at Cheap Rebuilt Transmissions Company
04:01p REMINDER/MEDIA ADVISORY : Industry Minister to Discuss Support for Families and Business in Kingston
03:37p BEST BUY : Future Shop closure "inevitable" but doesn't spell end of tech retailers: expert
03:34p CELLCOM ISRAEL : Ministry nixes Cellcom-Golan network merger
03:34p XENIA VC : Sleep apnea co Ninox raises $5m
03:34p OSEM INVESTMENT : 2014 profit up 5.3%
Latest news
Advertisement
Hot News 
JUDGES SCIENTIFIC : Profit Up But Like-For-Like Revenue Shrinks
MELROSE BANCORP : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)
OHR PHARMACEUTICAL : Announces Final Topline Data From OHR-102 Phase II IMPACT Study in Wet-AMD
ANDREWS SYKES : Temporary arena in London requires replacement heating
RBC BEARINGS : Nasdaq stocks posting largest percentage increases
Most Read News
03/28 OGE ENERGY : BRIEF: More than 3,000 without power in NW Oklahoma City
03/28 F SECURE : Hypponen Reviews the State of the Internet
03/28 A BROWN : Voter's guide
03/28 ST JUDE MEDICAL : . Jude launches trial of heart valve for children
03/28 PG&E6CPREF : PG&E helps Salvation Army with mobile vehicle
Most recommended articles
04:26pDJGreece's Fate Lies in Athens' Hands, Not Berlin's
04:13pDJFacebook Woos Chinese Advertisers
04:08p Greek reform list yet to take shape as talks with lenders continue
03:15pDJ'Home' Sweeps Away Box Office
02:07p Stocks likely to drift as investors await Fed, earnings
Dynamic quotes  
ON
| OFF