Lalita Clozel
speaker
117 appearances
3 recordings
1 series
first heard Mar 2018
last heard Sep 2019
Lalita Clozel’s voice in public audio — every appearance, attributed to the second.
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Appearances
But now some of the Fed officials who feel that even though capital levels are right now are saying that they're weighing finding ways to use that countercyclical capital buffer not to increase capital when things are going well, not just in that direction, but in the other direction.
So in other words, you would reserve the tool for when the downturn hits, and at that moment, you would have extra flexibility to cut capital requirements for banks so that banks can lend more.
Right.
So this is generally for banks with more than $250 billion in assets.
And this is part of why the tool exists.
And the idea is that when things are going well and maybe the financial system is too optimistic and banks might be lending too much and maybe making bad decisions on their loans, that's when you would restrict their ability to do that by increasing their capital requirements.
But again, so to a couple of the Fed officials who feel that capital levels are already high enough in the system,
are considering a way to actually use the counter-cyclical capital buffer, not now necessarily to increase capital requirements, but more as a tool to lower capital levels during a downturn.
So in a way, that would allow banks to not see their capital requirements increase, but it could give them kind of a release valve during the upcoming recession.
Yeah, and there has been a debate over the last year or so.
Some Fed officials who feel like banks should have more capital, should be holding more capital, and they currently are, have argued that the counter-cyclical capital buffer should be turned on, especially over the last year when asset prices were rising and the economy was...
showing some signs of risk to some of the Fed officials.
Right.
So they've been making statements and saying that they're weighing it.
There's no immediate plan to do so right now.
And actually, the Fed in March voted on, they have to vote annually on whether or not to turn this counter-cyclical capital buffer on.
So in March, they decided not to move it.
So it's been at zero.
Basically, it's been dormant since it's been created in 2016.
That's when the Fed put out a rule implementing it.
Showing 61–80 of 117 · page 4 of 6
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