Wednesday, December 17, 2014

OFR Annual Report Warns of Lingering Threats to Financial Stability

Author: David Schwartz J.D. CPA
In its most recent Annual Report, the Office of Financial Research (OFR) warns that despite the strengthening global financial system, threats to financial stability still remain, and it is no time for complacency.  Formed in 2010 as a part of the Treasury Department under a mandate in the Dodd-Frank Act, the OFR is charged with improving the quality of financial data available to policymakers and to facilitate more robust and sophisticated analysis of the financial system.  As part of its mission, in an annual report to Congress, the OFR analyzes potential threats to U.S. financial stability, documents significant progress in meeting the mission of the Office, and reports on key research findings.  This year’s document reports that, though the financial system has continued to recover and strengthen, and threats to financial stability are presently moderate, several financial stability risks have increased.  The three most important are excessive risktaking in some markets, vulnerabilities associated with declining market liquidity, and the migration of financial activities toward opaque and less resilient corners of the financial system.
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Thursday, December 11, 2014

Tarullo: Liquidity Regulation Today and Tomorrow

Who Will Be Swept Up in the Next Round of Liquidity Rules?

Author: David Schwartz J.D. CPA

The financial crisis of 2007-08 was a crisis of liquidity. Facing deep uncertainty about the condition of counterparties and the value of collateral assets, investors refused to offer new short-term lending or even to roll over existing repos and similar extensions of credit. As a result, many funding markets ground to a halt.  The role liquidity, or rather the sudden lack of liquidity, played in the most recent crisis is unlike that experienced in the savings and loan crisis or the Latin American debt crisis of the 1980s.  Consequently, regulators and policy-makers have found the regulation of liquidity to be a new frontier, and one that remains the focus of keen interest to the Federal Reserve.  Recently, Fed Board Governor Daniel K. Tarullo outlined his thoughts on both the importance of liquidity regulation, and the direction he sees it heading.

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Tuesday, October 9, 2012

Full Speed Ahead on the Volcker Rules Says Senior Treasury Official

Author: David Schwartz J.D. CPA
[W]e will not back away from our fundamental responsibility of making sure our financial system is safe. But we need smart regulation that can make future financial shocks less likely and less damaging – and without unnecessary compliance costs.  We want to make sure the rules are calibrated so they allow investors to take appropriate risks and do not restrict businesses from obtaining the credit they need to hire, invest and grow.

Despite efforts to delay or prevent them, the Volker Rules are on their way says Treasury Under Secretary for Domestic Finance Mary Miller in remarks to the American Banker Regulatory Symposium.  Miller says the five regulators working on the rules have read carefully the 18,000 comment letters on their initial proposal, and expect to issue final Volker Rules perhaps by year end.

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