A New Focus on the Risks Associated with Repos, Reverse repos, Securities Lending, and Securities Margin Lending
In a November 22, 2013 address before the Americans for Financial Reform and Economic Policy Institute Conference, Federal Reserve Board Governor Daniel K. Tarullo outlined a potential regulatory initiative to limit short-term wholesale funding risks. As we mentioned in our November 6, 2013 post regarding Fed President William C. Dudley's concerns about tri-party repo, the Fed remains worried about the systemic risk posed by disturbances in the short-term wholesale funding market as a whole. Tarullo's speech, however, goes further than Dudely's. Tarullo did not merely iterate the Fed's worries about the vulnerabilities created by the short term wholesale funding market, but actually outlined a regulatory framework by which the Fed may limit the systematic risks posed by short-term funding activities.