‘Lenders of last resort’ need to incentivise firms to hold more liquidity

Expanding the lender of last resort function to tackle financial distress is likely to work better when financial firms are incentivised to manage their liquidity risks in a socially responsible way.

Fed’s Brainard calls for lessons to be learned from Covid-shock

The market turmoil caused by measures to contain the spread of the Covid-19 pandemic, which necessitated massive public sector emergency support, underscores the need to make sure the financial sector can withstand a wide range of shocks, a Fed official has said.

Bank of England

Bank of England speech revives UK negative interest rate speculation

A speech from a Bank of England official has rekindled speculation that the central bank might be seriously considering cutting the UK base rate, currently at 0.1%, into negative territory saying this could provide a significant economic stimulus. 

FSB calls on G20 to address shadow bank risks following March volatility

Following market turmoil in March, the Financial Stability Board (FSB) has called for vulnerabilities in non-bank financial intermediation (NBFI) to be addressed. 

ESMA instructs exposed funds to prepare for future shocks

Investment funds with significant exposures to corporate debt and real estate assets have been told by the European Securities and Markets Authority (ESMA) to anticipate potential future adverse liquidity and valuation shocks.

US agencies finalise NSFR rule with some tweaks

Proposals over measures to ensure the resilience of banks during periods of financial stress in the US have been revised and a rule finalised, with the latter coming into force in mid-2021

US Treasury market still dogged by liquidity threats

The US Treasury market still has the potential to experience sudden liquidity droughts, such as those witnessed in March and April as the Covid-19 pandemic unleashed a wave of volatility across markets. 

Money market funds potentially face more rules

New rules for money market funds could be in the works following comments from deputy US Treasury Secretary Justin Muzinich that the reforms dating from the 2007-9 global financial crisis may not go far enough. 

FINMA consults on minor tweaks to liquidity regime

Interested parties are being asked to comment on minor amendments to Switzerland’s liquidity regime for banks by the Swiss Financial Market Supervisory Authority (FINMA).

LCR modified for banks participating in two Fed programmes

US federal prudential regulators have modified the liquidity coverage ratio (LCR) for banks participating in the Money Market Mutual Fund Liquidity Facility and the Paycheck Protection Program Liquidity Facility.