Fed’s Tarullo details plans to counter bank runs
Reuters.com
Friday, 22 Nov 2013
Global regulators need more policy tools to counter the risk of devastating bank runs and should have powers over a wide array of market participants, U.S. Federal Reserve Governor Dan Tarullo said on Friday.
“There is a need to supplement prudential bank regulation with a third set of policy options in the form of regulatory tools that can be applied on a market-wide basis,” Tarullo said at a conference on shadow banking.
He also detailed the Fed’s plans to write new rules that would make it less attractive for banks to raise cash in short-term wholesale funding markets, a key factor in the collapse of Lehman Brothers in 2008.
Banks that substantially rely on short-term funding in the interbank market should be required to hold more capital on top of what is already mandated by international rules under the so-called Basel III pact, Tarullo said.
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