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Fed's Mester urges keeping bank rules until resiliency can be tested

Reuters  |  FRANKFURT 

(Reuters) - Rules adopted after the financial crisis that have made big U.S. banks more resilient over the last decade should be tested in the next downturn before they are reduced in any major way, a Federal Reserve said on Friday.

repeated that the U.S. economic outlook is as strong as it has been "in a long time." But that does not mean that little-tested, so-called countercyclical standards, which would raise requirements on banks during good times and ahead of a downturn, should be tightened.

Instead, existing capital and liquidity standards should be set "somewhat higher than they would be if we had more experience with and confidence in the countercyclical tools," Mester said.

"It would be a mistake to unwind the steps taken since the financial crisis that have led to a more resilient financial system," she added in remarks prepared for delivery at the European Central in "I would like to see how the new settings perform throughout the cycle before making major changes."

The and the Republican-controlled have rolled back some financial regulations in an effort to free up capital, in an aim to boost economic growth. The Fed's leadership has taken a more measured approach, though it has moved to trim some capital requirements, and restrictions on small lenders.

The Fed has raised rates six times since late 2015 in a nod to low unemployment and below-target inflation. Mester, who backs the gradual hikes, said more aggressive tightening is a possible defense against any rising financial stability risks if such restrictions on banks proved inadequate.

(Reporting by Francesco Canepa; Writing by Jonathan Spicer; Editing by Leslie Adler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 12:32 IST
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