WASHINGTON, D. C. —– On March 3, 2021, the Systemic Risk Council issued a letter to the US Congress on the resilience and stability of the financial system in the wake of the recent extraordinary equity market volatility.
In addition to well publicized questions on market integrity and efficiency raised by the GameStop episode, the Systemic Risk Council urges the Senate Banking Committee and House Financial Services Committee to ensure the following four financial stability-related issues are properly addressed by the administration and the regulatory agencies:
- Whether the clearing house’s collateral practices were adequate
- Whether capital requirements for broker dealers are high enough
- Whether re-hypothecation of collateral should be banned, or constrained
- Whether the financial authorities could have done more to maintain system-wide resilience as feverish levered trading in capital markets was fueled by sustained monetary measures to support economic recovery
Paul Tucker, chair of SRC, said:
“While the recent equity market kerfuffle was not a direct threat to stability, the authorities must energetically learn from an ugly episode involving a scramble for collateral, to close out positions, and to cut off services. Congress should ensure the unfinished business of rebuilding the financial system’s resilience resumes.”
The full text of the letter to Congress is here.
The text of the SRC’s 2020 statement on unfinished business is here: http://4atmuz3ab8k0glu2m35oem99-wpengine.netdna-ssl.com/wp-content/uploads/2020/10/SRC-Reigniting-the-Reform-Debate.pdf.