Governor Daniel K. Tarullo At the George Washington University Center for Law, Economics, and Finance Conference on the Dodd-Frank Act, Washington, D.C., November 12, 2010 – Next Steps in Financial Regulatory Reform:
“The financial crisis showed that the concentrated, almost all-consuming regulatory focus on refining bank capital requirements in Basel II had come at the expense of attention to other risks in the financial system. In particular, there was insufficient appreciation of the implications of the growth in size, leverage, and maturity transformation levels of the shadow banking system for the balance sheets of commercial banks and for overall financial stability. The limitations of capital requirements as a regulatory tool, such as the frequent lag between declines in asset values and reductions in bank capital, were also confirmed by experience during the crisis.”
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