The Federal Reserve today proposed new measures to enable large systemic banks to weather prolonged periods of stress. The new rules force institutions to maintain additional levels of assets on their balance sheets to fund their operations for at least 30 days in the event that other sources of funding are no longer available.
These requirements, which go beyond international agreements, are intended to avoid a repeat of what happened in 2008 when many banks were brought to their knees due to the sudden lack of liquidity on the markets. The aforementioned measures will apply to banks with assets of over 250 billion dollars, while for banks with assets of 50 billion or more the requirements will be less stringent.
"Liquidity is essential for a bank's ability to function - said Fed Governor Ben Bernanke - and is central to the proper functioning of the financial system". The committee of governors will vote in the afternoon on this proposal to adopt it definitively.
