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
Speaking at a
The bank failures illustrated the speed at which uninsured deposits can flow out of a bank, Hsu said. They also showed that having liquid assets is necessary but not sufficient for banks to endure acute liquidity stress-banks need to be adequately prepared and have the operational capacity to monetize those assets quickly. The liquidity coverage ratio already requires large banks to hold high-quality liquid assets sufficient to meet stressed liquidity outflows over a 30-day period, but the
Also, a new targeted regulatory requirement for midsize and large banks to have sufficient liquidity to cover stress outflows over a five-day period warrants serious consideration, Hsu said. 'The denominator should consider the potential speed and severity of uninsured deposit outflows, while the numerator should consider the liquidity value of pre-positioned discount window collateral, in addition to reserves. The rule should also clarify operational preparedness expectations related to the [
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