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Yellen: Fed considering fixes for short-term wholesale funding market

The Federal Reserve is considering adopting more measures to address the remaining financial-stability risks in the short-term wholesale funding markets, Fed Chair Janet Yellensaid on Tuesday.

In a video speech, Yellen praised new liquidity standards for global banking firms, but warned that they do not apply to so-called shadow banks or to the financial system as a whole.

The so-called Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) standards "do not fully address the financial stability concerns associated with short-term wholesale funding," she said via video to a financial markets conference at the Atlanta Fed.

"Federal Reserve staff are actively considering additional measures that could address these and other residual risks in the short-term wholesale funding markets."

She pointed to a study by the Basel Committee suggesting there would be net social gains from further reforms.

"While it would be a mistake to give undue weight to any one study, this study provides some support for the view that there might be room for stronger capital and liquidity standards for large banks than have been adopted so far," she said.

The short-term wholesale funding market has been a focus of Fed officials for some time, with some warning it was a major unaddressed legacy of the financial crisis. Big banks and corporations use that market to fulfill some of their cash needs.

Late last year, Fed governor Daniel Tarullo gave a speech in which he outlined proposals to address those risks, including the prospect of extra capital requirements for businesses that used the short-term funding market.

Read MoreTarullo: Regulators need more policy tools

—Reuters with CNBC.com


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