Speech – Regulatory Landscapes: A U.S. Perspective

by Sabrina I. Pacifici on June 3, 2013

Vice Chair Board of Governors of the Federal Reserve System, Janet L. Yellen, At the International Monetary Conference, Shanghai, China, June 2, 2013 - Regulatory Landscapes: A U.S. Perspective: “The financial crisis revealed that banking firms around the world did not have enough high-quality capital to absorb losses during periods of severe stress. The Basel III reforms promulgated in 2010 by the Basel Committee on Banking Supervision will increase the amount of regulatory capital required to be held by global banking firms and improve the loss-absorbing quality of that capital. U.S. banking agencies issued proposals last summer to implement BaselIII’s capital reforms, have reviewed comments, and are preparing the final regulation. We also were reminded during the crisis that a banking firm–particularly one with significant amounts of short-term wholesale funding–can become illiquid before it becomes insolvent, as creditors run in the face of uncertainty about the firm’s viability. The Basel Committee generated two liquidity standards to mitigate these risks: a Liquidity Coverage Ratio with a 30-day time horizon and a Net Stable Funding Ratio (NSFR) with a one-year time horizon. The U.S. banking agencies expect to issue a proposal to implement the Liquidity Coverage Ratio later this year, and we are working with the Basel Committee now to review the structure and parameters of the NSFR.”



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