“Federal Reserve Board Gov. Daniel Tarullo said Friday that short-term wholesale funding continues to pose a risk to the largest banks and that fixing such “structural vulnerabilities” is a top priority to protect the financial system.
“In a broad policy speech, he argued that an additional capital buffer on the biggest banks should be put into place and said that it must be a stand-alone requirement that is not beholden to economic conditions.
“‘One reason I place a high priority on initiatives to address the vulnerability created by short-term wholesale funding is that the development of these and other structural measures does not depend so heavily on identifying when credit growth or asset prices in one or more sectors of the economy have become unsustainable,’ Tarullo said.
“The central banker has repeatedly called for further reforms on short-term wholesale funding given the risk of potential fire sales, as were seen during the 2008 financial crisis.”
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