US banks may be required to hold more long-term debt

5 December 2012

Banks in the US could be required to hold higher levels of long-term debt in the near future, it has emerged.

Daniel Tarullo, a senior policymaker at the Federal Reserve (Fed) believes such a legal measure would help gradually reduce financiers' reliance on short-term funding markets.

During a speech delivered yesterday (4 December) in Washington DC, Mr Tarullo revealed that regulators are currently examining proposals to change these rules in order to increase stability in the banking industry.

The official explained that initial discussions on the matter have not suggested "any unfavourable unintended consequences", meaning its appeal as a "near-term policy priority" has strengthened.

Should these proposals be ratified, regulators would be granted more control over failing banks as it would allow bodies to move operating divisions of such to a temporary entity.

Mr Tarullo insisted this could instil greater confidence in the markets that taxpayer bailouts will not be required to save struggling financiers.

By Claire Archer

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