Financial Stability News

News about financial stability and central banking

The neglected part of international financial reform: Liquidity regulation | vox

This Vox post by Stefan Schmitz from the central bank of Austria, is quite interesting. He describes the current back-peddaling on the liquidity regulation by key policy makers and argue strongly that the regulation should be implemented as planned.

If this collides with a shortage of safe assets, banks should reduce their short-term net cash outflows (p. 6)

This mismatch between the need for safe assets and the growing size of the financial (trading) sector is something I dealt with in my Levy WP 712: Shadow banking and the limits of central bank liquidity support.

It will indeed be interesting to see how the this regulatory fight will be influenced by the ongoing crisis.

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