Fed official defends LCR treatment of custody deposits

Rising rates may ease the pressure on custodian banks, Gibson claims

Custody banks have criticised the Fed's LCR rule

A senior Federal Reserve official has shrugged off claims that new capital and liquidity charges are forcing custodian banks to turn away client deposits, suggesting instead that the industry's woes may be "temporary".

Custodian banks have complained about the treatment of so-called 'excess custody deposits' – cash held on deposit at the Federal Reserve on behalf of customers – as a form of short-term wholesale funding (STWF), which attracts significant capital and liquidity charges.

"Where the

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