Financial Regulatory Forum

Fed’s Kohn warns on interest rate risk

By Karey Wutkowski

ARLINGTON, Va., Jan 29 (Reuters) – A senior U.S. Federal Reserve official warned on Friday that the uncertain path of interest rates poses risks for banks inattentive to the match of durations among their assets and liabilities.

Federal Reserve Vice Chairman Donald Kohn told a conference sponsored by the Federal Deposit Insurance Corp that the usual uncertainty about interest rates in coming months is compounded in the current situation by the fact that rates are near zero and the Fed has massively expanded the amount of reserves in the banking system.

“Borrowing short and lending long is an inherently risky business strategy,” Kohn said. “Intermediaries need to be sure that as the economy recovers, they aren’t also hit by the interest rate risk that often accompanies this sort of mismatch in asset and liability maturities.”

The Fed has pledged to keep benchmark rates exceptionally low for an extended period, and renewed that promise on Wednesday at its regular policy-setting meeting.

Kohn said the Fed would stick to that commitment if the economy follows the the trajectory expected by the Fed.

Bernanke sees tighter policies as economy heals

By Mark Felsenthal
WASHINGTON, Oct 8 (Reuters) – The U.S. Federal Reserve must continue measures to prop up the economy for an extended period but can’t do so indefinitely for fear of triggering an inflationary surge, Federal Reserve Chairman Ben Bernanke warned on Thursday.

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BoE mulls rate cut on bank reserves to stimulate lending

BRITAIN-BANK/   By Sumeet Desai and David Milliken
   LONDON, Sept 15 (Reuters) -  The Bank of England could cut the interest rate it pays on the reserves it holds for commercial banks to help stimulate lending and nurture what it says will be a gradual economic recovery, Governor Mervyn King said on Tuesday. (more…)

Nigeria surprises with rate cuts, lifts forex controls

Nigerian Central Bank Governor Joseph Sanusi   By Randy Fabi
   ABUJA, July 7 (Reuters) – Nigeria’s new central bank chief surprised markets by slashing interest rates by 2 percentage points on Tuesday, as he also set about reforming the banking sector and lifted foreign exchange controls. (more…)

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