Wall Street banks believe they are getting a green light from supervisors to hol...
NEW YORK/WASHINGTON - Wall Street banks believe they are getting a green light from supervisors to hold more Treasury debt and less cash after last month’s volatility in overnight lending markets, three industry sources told Reuters.
Banks have complained for years that the U.S. Federal Reserve can be painfully prudent with its view that Treasury bonds are not the same as ordinary dollars when used as a liquidity buffer. Bankers previously came out of that process understanding that the Fed preferred them to hold cash rather than Treasury bonds in times of stress, industry sources said. A struggling bank looking to offload large volumes of Treasury bonds may need to do so at a deep discount, which is a worry for regulators.
The Fed’s approach to regulation and supervision has relaxed since U.S. President Donald Trump appointed Randal Quarles as head of banking supervision two years ago. Quarles said the Fed was rethinking its position on reserves at a May 2018 conference, but bank sources said they did not experience any change in approach until recently.
Some bankers, including JPMorgan Chase & Co Chief Executive Jamie Dimon, say that prevents them from easing stress in repo markets.
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