You are here

Regulators want changes to short-term loans to handle 'too-big-to-fail' firms

[BENGALURU] Global banking regulators are worried that short-term loans worth trillions of dollars could hinder their efforts to handle a failing financial institution, the Wall Street Journal reported, citing people familiar with the matter.

The regulators want changes to terms of repo contracts and securities-lending agreements, the Journal reported.

The plan is regulators' latest bid to end the risk posed by "too-big-to-fail" firms, which are so huge and interconnected that regulators believe they pose a threat to the entire financial system.

Under the proposed changes, firms trading with a troubled financial institution would agree to temporarily waive some of their contractual rights, such as early termination of their contracts, which would buy regulators and the firm time to arrange a lifeline.

Market voices on:

The discussions come at the urging of regulators at the Bank of England, the US Federal Reserve and the US Federal Deposit Insurance Corp, among others, the report added.

The regulators could not immediately be reached for comment.

A primary focus for regulators in countries in which many major banks are based, has been to keep a failing firm operating long enough to find a buyer or recapitalize it, the report said.



Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at

Powered by GET.comGetCom