The FED recently polled 51 senior bank officers, whose assets represent 2/3 of all reserve deposits in the US. When asked, they said they would prefer to have the option to keep only half of their current reserve requirements – which in August stood at about $1.2 Trillion. Some suggested they would be willing to go as low as 25% of current reserve requirements.
What amount of economic activity could be generated if $600 billion were freed up to make capital investments or other allocations into the markets? Would it really benefit the economy or primarily the banks themselves?
For the full report from the Federal Reserve Click here.
The cost for stress testing, impaired market modeling and liquidity management potentially will also significantly decline. Look for requirements for sub $250 Billion/non-SIFI institutions to realize significant relief in these areas in the near future.
For Chairman Powells’ recent open meeting transcript Click Here. The first two pages outline this proposal.
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