March 04, 2016
Opening Statement on the Proposed Rule Establishing Single-Counterparty Credit Limits for Large Banking Organizations by Chair Janet L. Yellen
Good afternoon. I'd like to welcome our guests to the Federal Reserve today as we take another important step to enhance the resiliency and stability of our financial system.
In the financial crisis, we learned that the largest and most complex banks and financial institutions lent or promised to pay large amounts to other institutions that were also very large and complex. These credit extensions and promises did not eliminate risk, and in many cases they magnified it.
The single counterparty credit limit we are considering today targets that problem. The credit limit sets a bright line on total credit exposures between one large bank holding company and another large bank or major counterparty. For the very largest banks--those considered to be global systemically important banks, or G-SIBs--the exposure to another major counterparty is stricter than the limits placed on smaller banks and will be set at 15 percent of tier 1 capital.
I am pleased to be considering this rule, because we are determined to do as much as we can to reduce or eliminate the threat that trouble at one big bank will bring down other big banks.
I look forward to this discussion and will now turn to Governor Tarullo.