April 16, 2014

Yellen says Fed may up bank capital standards

April 17, 2014 – Federal Reserve Chair Janet Yellen spoke this week on capital standards, saying the Fed is considering higher capital standards for large banks with excessive liquidity risk.

"Capital requirements as currently constructed are generally based on credit and market risks from the asset side of the balance sheet and from off-balance-sheet transactions," Yellen said. "They do not directly address liquidity risk."

Yellen referenced a 2010 Basel Committee on Banking Supervision study and said it indicated that higher capital and liquidity standards would be a net positive for the economy. "This study 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," she said.

Yellen also spoke about the possibility of imposing minimum margin requirements on repurchase agreements, which would affect the entire market, not just large banks.