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Fed Weighing New Rules on Short-Term Borrowing

A crucial part of Wall Street still keeps federal regulators up at night. But Janet L. Yellen, the chairwoman of the Federal Reserve, said on Tuesday that the Fed was actively considering measures to strengthen that potential weak spot.

Ms. Yellen said that despite an onslaught of new bank regulations, risks remained in the markets where Wall Street firms and other entities lend and borrow hundreds of billions of dollars for short periods. The 2008 financial crisis showed that these gigantic markets were particularly susceptible to panic. With that in mind, Ms. Yellen suggested some measures on Tuesday that could restrain the use of short-term borrowing at the largest banks — including requiring them to hold more capital.

“There might be room for stronger capital and liquidity standards for large banks than have been adopted so far,” Ms. Yellen said in a prerecorded speech to the Federal Reserve Bank of Atlanta’s Financial Markets Conference.

NY Times [1]

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