Basel liquidity rules block Fed’s QE exit

Lead illo risk 0318 — "Returning to a small balance sheet... is not consistent with the LCR requirement," says Stanford's Darrell Duffie

Image: Stephen Lee, NB Illustration

Kris Devasabai
07 Mar 2018

Tweet
Facebook
LinkedIn
Save this article
Send to
Print this page

After flooding the market with liquidity for the better part of a decade, the US Federal Reserve has begun tightening the spigot. Over the next five years, its asset portfolio will shrink by as much as $1.9 trillion as a result of ‘balance sheet normalisation’, which started in October 2017.

This reduction in the Fed’s balance sheet assets must be matched on the liability side by a decline in reserve balances, which banks maintain for liquidity purposes. To put it another way, the Fed’s

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to print this content. Please contact [email protected] to find out more.

You are currently unable to copy this content. Please contact [email protected] to find out more.

You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/

If you would like to purchase additional rights please email [email protected]

You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/

If you would like to purchase additional rights please email [email protected]