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 | 08:21pm US/Eastern
Recommend:
0

(Adds comments from Mr. Tarullo in final paragraph.)

 
   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.

Mr. Tarullo also said regulators have "tentatively discussed" proposals to require minimum so-called haircuts for participants in securities financing transactions. He said one means of doing so would be to attach the requirements to instruments or transactions, rather than firms, but offered little other detail.

--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
<1m ago O'REILLY AUTOMOTIVE : Reports First Quarter 2014 Results
<1m ago Eagle Rock Announces Suspension of Distribution, Intent to Resume Following Close of Midstream Contribution Transaction
3m ago AT&T : Recognizing Our Administrative Professionals
3m ago AT&T : SCHOTT Turns to AT&T for Global Collaboration
3m ago AT&T : and Fusebox Festival Artist Team Up to Create Social Masterpieces
3m ago AT&T : The Future of the Connected Car
3m ago AT&T : Adds Amdocs and Juniper to its "User-Defined Network Cloud" Supplier Program
3m ago AT&T : Earth Day – The Love/Hate Relationship
3m ago AT&T : The Chernin Group and AT&T Create New Venture to Acquire, Invest In and Launch Online Video Businesses
3m ago MOLECULAR PHARMACOLOGY USA : Studies from Harvard University Describe New Findings in Molecular Biology
Latest news
Advertisement
Hot News 
MATRA PETROLEUM : EGM Statement – Cancellation of trading on AIM
RTC : Board Appointment
ZOTEFOAMS : Unilever to use Zotefoams's MuCell® Extrusion technology for its Dove Body Wash Bottles in Europe
IRONVELD : Shares Jump 26% As Study Confirms Viability Of Iron Project
WEDNESDAY SECTOR LEADERS : Rental, Leasing, & Royalty, Precious Metals
Most Read News
18m ago GE in talks to buy France's Alstom - Bloomberg
27m ago COMMERCE RESOURCES : Comments on Recent Rockstone Article on Comparative Evaluation of a Rare Earth Deposit
22m ago COLUMBIA : Commercial Bancorp : Reports First Quarter 2014 Results
29m ago CELANESE : to Add Fortron® PPS Compounding Capability to Nanjing Integrated Chemical Complex
17m ago MARRIOTT : The American Bankruptcy Institute (ABI) - Conference
Most recommended articles
11h ago Global share rally peters out, euro lifted by PMI boost
6h ago Weaker FTSE 100 gets support from ABF and AstraZeneca
1d ago Barclays joins retreat from commodities as new rules bite
6d ago BLACKSTONE : earnings rise 30 percent, boosted by private equity gains
5m ago EUR/JPY Technical Analysis – Flat-Lined Below 142.00 Mark
Dynamic quotes  
ON
| OFF