by The Compliance Exchange on April 11, 2012
From San Francisco Chronicle:
Federal Reserve Chairman Ben S. Bernanke called on regulators to stem risks from “shadow banking” operating beyond traditional oversight and favored steps to promote the “resiliency” of money market funds.
“An important lesson learned from the financial crisis is that the growth of what has been termed ‘shadow banking’ creates additional potential channels for the propagation of shocks through the financial system and the economy,” Bernanke said today in a speech in Stone Mountain, Georgia.
Bernanke also called for close tracking of financial innovation and backed curbs on intraday credit in tri-party repo markets. While not specifying what steps he supports to increase stability among money market funds, he referred to Securities and Exchange Commission proposals to require firms to maintain capital buffers or to redeem shares at the market value of underlying assets rather than at a fixed price of $1.
Congress under a 2010 regulatory overhaul known as Dodd- Frank mandated the Fed to safeguard stability partly by monitoring firms whose collapse may provoke turmoil across financial markets. The law is aimed at averting a repeat of the credit crisis that was triggered by the collapse of U.S. mortgage finance and deepened by the failure of Lehman Brothers Holdings Inc. in 2008.