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Jakarta, Financeroll.com – Federal Reserve Board of Governor Daniel Tarullo said today that each systemically financial firm should be subject to a consolidated supervisor that would monitor it's risk taking, risk management, financial standing, and be hold it to high capital and liquidity standards.


In his testimony today before to the Senate Banking Committee, Tarullo said that supervision of individual financial firms is "not a sufficient condition for financial stability" but certainly "a necessary condition."

Another condition that is going forward would be for the US to establish methods through with to orderly resolved institutional failures, particularly if government assistance is required. He added that lessons could be learned from the frameworks in place under the Federal Deposit Insurance Act and those established for Fannie Mae and Freddie Mac under the Housing and Economic Recovery Act of 2008. "Both models allow a government agency to take control of a failing institutions’ operations and management, act as conservator or receiver for the institution, and establish a 'bridge' institutions to facilitate an orderly sale or liquidation of the firm."

On improving financial infrastructure that supports trades, payments, clearings and settlements, Tarullo stated that the Fed is considering the idea of a central clearing system. He added "Given how important robust payment and settlement systems are to financial stability, and the functional similarities between many payment and settlement systems, a good case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems."

Tarullo also expressed support for a systemic regulator, which he said would serve to complement, does not replace the consolidated supervisor role he feels is so necessary.

Written by denny yahya