The danger of excessive risk returns to American finance and it is once again frightening shadow banking, the shadow banking sector. For this reason, the Federal Reserve keeps the race for yields under control. The governor of the American Central Bank said today, Ben Bernanke, in a speech given at the Annual Bank Structure Conference in Chicago. An opportunity to take stock of the vulnerabilities of the financial system almost five years after the 2008 financial crisis.
“In light of the current macro environment characterized by ultra-low interest rates – Bernanke said – we look very carefully at any instances of the race for yields and other forms of excessive risk-taking, which could potentially have repercussions on asset prices. and their relation to the fundamentals”.
Even if the shadow banking sector "is smaller today than it was before the crisis" and some of its less stable components "have disappeared or have undergone reform", regulators and the private sector "need to eliminate vulnerabilities which still remain – continued Bernanke -. Systemic risks can only be eliminated if they are identified in time".
The number one of the Fed underlined that the financial system is dynamic and evolving not only due to innovations and the different needs of the economy, "but also because financial activities tend to move from more regulated sectors to less regulated ones".
In any case, the Federal Reserve has "wide-ranging programs to manage possible bubbles," some of which may not be identifiable in advance. According to Bernanke, "it is not reasonable to assume that we can always identify valuation problems", but it is generally necessary to ensure that the financial system, more specifically the banking system, is properly monitored. "It is very important to ensure that large institutions are solid and stable," said the Fed's head.
In this sense, Bernanke reiterated that "it is necessary to eliminate too big to fail", banks that are too big to be left to fail. One of the objectives of the Dodd-Frank Act, the finance reform law passed in 2010, "is precisely to resolve the serious issue" of important institutions from a systemic point of view.
