RD News 13April12

• Speech by Daniel K Tarullo (member of Board of Governors, Fed Reserve): Developing tools for dynamic capital supervision, describing the Federal Reserve’s approach to stress testing
• Summary by the ICFR

• Speech by Ben S Bernanke (Ch Board of Governors, Fed Reserve): Fostering financial stability

• Speech by William Dudley (President of the NY Fed): Testimony on the economic and fiscal challenges facing Europe
• Recent stress tests showed that US banks are much more robust and resilient than they were a few years ago. But US money market funds have significant European holdings, so “if the crisis were to broaden further and intensify, it would put pressure on the capital and liquidity buffers of US banks and other financial institutions.”

• ECB Spring Bulletin 2012: including (on p2) Bubbles, banks and financial stability by Kalin Nikolov

• ECB urges EU authorities to allow member states to impose stricter capital requirements in order to combat systemic risk
• Economic and financial cycles are not harmonised across EU countries, and the structure of the financial system varies from country to country.
• The issue is controversial, with some member states pushing for ‘maximum harmonisation’, whereby capital requirements would pose both minimum and maximum capital levels.
• Existing proposals allow for some flexibility, but these comprise mainly micro-prudential tools aimed at individual institutions, rather than macroprudential tools aimed at systemic risk.
• The ECB recommends that the scope for national discretion should be expanded to allow member states to impose stricter requirements for capital and limits on large exposures, as well as liquidity and leverage ratios, when these latter elements are introduced.
• The ECB suggests that the European Systemic Risk Board (ESRB) could play a coordinating role in order to ensure consistency across the EU, with the ESRB and the European Banking Authority (EBA) publishing a list of measures more stringent than those in the regulation.
• Link to the legal opinion