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Last Updated : Dec 17, 2019 10:29 PM IST | Source: Reuters

Fed's Kaplan says revisiting some stress testing rules could help ease repo pressures

'In terms of our testing, sometimes Treasury securities are treated differently than reserves, even though Treasury securities are obviously obligations of the federal government,' Kaplan said in a discussion with reporters after a participating in a moderated discussion in New York.

Dallas Federal Reserve Bank President Robert Kaplan said he thinks it would be "healthy" for the central bank to revisit some aspects of its stress testing requirements for banks to ease pressure in the repo market.

"In terms of our testing, sometimes Treasury securities are treated differently than reserves, even though Treasury securities are obviously obligations of the federal government," Kaplan said in a discussion with reporters after a participating in a moderated discussion in New York. "I think looking at that would be a healthy thing."

Reuters previously reported that some banks believe they were getting a green light from supervisors to hold more Treasury debt and less cash, which could encourage them to lend out more reserves and ease some of the recent pressure in short-term funding markets.

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Overall, Kaplan said he doesn't believe regulators should be easing capital requirements and stress testing for large banks, which he views as a safeguard shielding the economy from growing corporate debt loads.

 

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First Published on Dec 17, 2019 10:26 pm
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