Trading Book regime needs change, says Schmidt Bies

New liquidity and credit risks in the trading book warrant the review of the Market Risk Amendment of 1996 as proposed by the Basel Committee, according to Susan Schmidt Bies, member of the Federal Reserve Board of Governors.

Speaking at the Standard & Poor's North American Financial Institutions Conference at the end of November in New York, Schmidt Bies said a number of changes have taken place in the composition of banks' trading books that have led supervisors to question whether the 1996 capital regime remains appropriate.

"Trading books today include many more credit-related products, as well as other structured and exotic products, that are far less liquid than the products for which the 1996 regime was

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