BANGKOK (MNI) – Boston Federal Reserve Bank President Eric
Rosengren said Monday that U.S. banks have “dramatically” better
liquidity conditions and are much better capitalized than in the past,
something regulators have focused on in order to ensure they are
prepared for future financial shocks.
“I think there’s an open question about whether capital ratios are
high enough and whether liquidity is enough. And I think that’s
something that we’ll have to wrestle with over the future years,” he
said in a question and answer session at Sasin Bangkok Forum here.
Rosengren said U.S. banks are already meeting Basle III standards
for liquidity and capital ratios, for the most part.
“They have become much better capitalized; their liquidity
situation has improved quite dramatically,” he said.
One of the reasons bank supervisors have been so focused on
lquidity and capital adequacy is that they want banks to be prepared for
any future financial shocks.
But he noted that even with such preparations, “I don’t
think there’s anything we could do to prevent a transmission” to banks
globally in the event of another financial shock.
“We can try to mitigate if a shock were to occur but I think the
idea that we can completely offset any shocks is not a reasonable
expectation,” he said.
“All we can do is to make sure there is enough capital and
liquidity that when one of those assumptions goes wrong we don’t have
the entire financial structure in peril.”
Rosengren said there hasn’t been enough attention paid to capital
adequacy issues in the past.
” I think reflecting on the last 20 to 30 years — we’ve been
under capitalized, we’ve not taken seriously enough liquidity issues.”
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