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Wednesday, April 16, 2014

Yellen: ‘Might Be Room’ for Higher Capital, Liquidity Standards

The Basel III capital and liquidity standards may be insufficient to address financial stability risks -- in particular, risks associated with short-term wholesale funding -- Federal Reserve Chairman Janet Yellen said via video to a financial conference in Atlanta.

Yellen said the liquidity standards proposed last fall “do not fully address” financial stability concerns since they apply only to internationally active banks and not to the shadow banking sector that “played a major role in the crisis.” She also cited a 2010 Basel Committee study that she said “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.”

Among additional measures to address short-term wholesale funding issues might be higher requirements for capital, stable funding or highly liquid assets, as well as minimum margin requirements for repos and other securities transactions, Yellen said.

Read the speech.

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