Fed’s Tarullo Sees Remaining Contagion Risk in Bank Liabilities

Federal Reserve Governor Daniel Tarullo said large banks are vulnerable to runs from non-deposit liabilities, and regulators need to do more to curb such risk.

“These vulnerabilities involve both large, prudentially regulated institutions, and thus too-big-to-fail concerns, and the broader financial system,” Tarullo said today in the text of remarks to the Cornell International Law Journal Symposium in New York. “The liability side of the balance sheets of financial firms has been barely addressed in the reform agenda.”

Fed bank supervision and monetary policy is increasingly focusing on stemming threats to financial market stability. Tarullo, the Fed governor in charge of financial regulation and bank oversight, has worked with Chairman Ben S. Bernanke on the overhaul of the central bank’s risk surveillance and bank oversight.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net