Fix the frame, wipe the glass
Recent experience, particularly with the Bank Term Funding Program, shows how to improve the functioning of the Fed’s discount window and strengthen financial stability.
Recent experience, particularly with the Bank Term Funding Program, shows how to improve the functioning of the Fed’s discount window and strengthen financial stability.
Liquidity regulation has the potential to impose significant costs and limit the lending capacity and business operations of banks, which must be taken into account before imposing any new requirements, Federal Reserve Governor Michelle Bowman said.
Bankers look back on the bank failures of spring 2023 and share some lessons learned and strategies for success.
The Federal Reserve discount window is an essential component of liquidity risk management, but several reforms must be made to meet the needs of banks of all sizes, ABA said.
If federal regulators plan to revise bank liquidity requirements or related reporting, then they should first issue advance notices of proposed rulemaking to give the public and banking industry sufficient time to review and comment on the proposals, ABA said.
The Federal Reserve announced that the Bank Term Funding Program will cease making new loans as scheduled on March 11.
A new targeted regulation requiring midsize and large banks to show they can maintain sufficient liquidity for at least five days during bank runs and other times of stress deserves “serious consideration,” Acting Comptroller of the Currency Michael Hsu said.
John Vivian and Hugh Carney explore the agency’s findings, including the way credit risk and leapfrogged liquidity risk over the course of the year and the OCC’s concerns on artificial intelligence, among other topics, and what they portend for bank supervision in 2024.
The speed at which deposits left Silicon Valley Bank and Signature Bank, as well as concerns regarding banks’ ability to monetize their liquidity buffers, suggest that it may be necessary to reexamine requirements regarding self-insurance standards and discount window preparedness, Federal Reserve Vice Chairman for Supervision Michael Barr said.
Part of bank resiliency is the importance of contingency funding planning and preparedness, Barr said.