Fed’s Brainard Addresses NSFR and Volcker Rewrite

Fed’s Brainard Addresses NSFR and Volcker Rewrite


According to a recent speech by Federal Reserve (Fed) Governor Lael Brainard, the Fed is close to finalizing the Net Stable Funding Ratio (NSFR). Specifically, Brainard said that the NSFR will “serve as a natural complement to our existing liquidity coverage ratio, which helps ensure firms can withstand liquidity strains over a 30-day time horizon. And by most estimates, our large complex banking institutions are in a position to meet the expected requirements with little adjustment.”


During her speech, Brainard also voiced her support for the banking agencies’ ongoing efforts to streamline the Volcker Rule, noting that “the interagency regulation implementing the Volcker Rule is not the most effective way of achieving its very laudable and important goal.” She went on to explain that the agencies are focusing on ways to “tailor the Volcker compliance regime to focus on firms with large trading operations and reduce the compliance burden for small banking entities with limited trading operations” but warned against making any “material changes” to the core capital and liquidity framework adopted in the post-crisis period for the largest financial institutions.


As stated in SFIG’s Comprehensive White Paper on Proposals for Regulatory Reform, the NSFR could have a detrimental long-term effect on ABS liquidity if it is not calibrated to reflect the actual liquidity of these securities. If you are interested in joining SFIG’s Regulatory Capital & Liquidity Committee or Volcker Task Force to stay informed on these issues, please contact Alyssa.Acevedo@sfindustry.org.


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