Barr – Restrictive Policy Needs Further Time, Mulling Regulation Options

Vice Chair for Supervision Barr says in prepared remarks for a keynote address that restrictive policy needs further time to do its work and that the Fed is in a good position to hold rates steady whilst it watches. The economy is strong, growth is solid and unemployment is low.

On financial matters and to address the lessons learned around SVB's failure last spring, the Fed is considering forcing larger banks to maintain a certain amount at the Fed’s discount window and is also weighing limits on assets that banks can hold as their liquidity buffers:

• i)“we are exploring a requirement that banks over a certain size maintain a minimum amount of readily available liquidity with a pool of reserves and pre-positioned collateral at the discount window, based on a fraction of their uninsured deposits.”
• ii)“we are considering a restriction on the extent of reliance on held to maturity (HTM) assets in large banks' liquidity buffers, such as those held under the liquidity coverage ratio (LCR) and the internal liquidity stress test (ILST) requirements, to address the known challenges with their monetization in stress conditions.”
• iii)“we are reviewing the treatment of a handful of types of deposits in the current liquidity framework.”