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
Recommend:
0

(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

Recommend :
0
React to this article
Latest news
Date Title
4m ago EMIRATES TELECOMMUNICATION : UAE's Etisalat introduces Global Data Plan
6m ago NESTLE : Prepared Foods Company Announces Allergy Alert and Voluntary Recall Of Lean Cuisine(TM) Culinary Collection Chicken with Peanut Sauce
18m ago NADL & Rosneft Singed Agreement of Land Drilling Rigs
23m ago EANS-VOTING RIGHTS : Andritz AG / Publication of an Announcement after art. 93 BörseG with the objective of Europe-web publication
25m ago PRINCIPAL FINANCIAL : Parrett Joins the Principal Financial Group as VP of Consulting
35m ago COCA COLA : Boys & Girls Club Kids Get Healthy By Logging One Million Minutes in Motion During the Triple Play Mobile Tour
35m ago UNITED CONTINENTAL : Register Now for the O'Hare 5K 'Run on the Runway' on October 5, 2014
1h ago GREEN DOT : Scam: Callers Claiming to be from Appalachian Power Use Scare Tactics to Get Cash from Businesses
1h ago BGE CAP T 6 2% 43 : Helps Customers Get Their Homes in A+ Shape for Fall with Quick Home Energy Check-ups
1h ago CONSMRS ENG4HCPFD : Consumers Energy Ready to Test Newly Constructed Southwest Michigan Pipeline
Latest news
Advertisement
Hot News 
PEREGRINE SEMICONDUCTOR : Murata to Acquire Peregrine Semiconductor for $12.50 Per Share in Cash
KEURIG GREEN MOUNTAIN : strikes deal with Kraft on coffee brands
PARKERVISION : Regulation FD Disclosure, Other Events, Financial Statements and Exhibits (form 8-K)
QUNAR CAYMAN ISLANDS : Q2 Loses More Money
CHC : Clayton, Dubilier & Rice to Invest in CHC Group
Most Read News
1d ago WEB : Offers Free Seminar to Help Boston Area Small Businesses Strengthen Their Online Presence
1d ago TARGET : Gov't warns US retailers about hacking software
1d ago AMAZON : developing own online advertising software: WSJ
1d ago Goldman Sachs, U.S. agency in mortgage settlement worth $1.2 billion
1d ago MANCHESTER UNITED : Robin Van Persie Takes the ALS Ice Bucket Challenge
Most recommended articles
1d ago WEEKLY TRADING FORECAST : Can the Dollar Extend its Bull Trend?
1d ago Dollar’s Best Rally in 18 Months Will Stall Without Catalyst
1d ago Market leaders seen taking S&P 500 to 2,000
1d ago Cargill sues former employee for breach of contract
1d ago AMAZON : developing own online advertising software: WSJ
Dynamic quotes  
ON
| OFF