US Federal Reserve Chairman Ben Bernanke on Friday said the central bank is stepping up its monitoring of “too big to fail” companies and other risks to financial stability.
Bernanke said the Fed was moving into a more systemic mode of financial monitoring after failing to spot the seeds of the 2008 Wall Street meltdown more than four years ago.
“The step-up in our monitoring is motivated importantly by a shift in financial regulation and supervision toward a more macroprudential, or systemic, approach,” Bernanke told a Chicago Fed conference, according to the prepared text.
That approach supplements the central bank’s traditional focus on the health of individual institutions and markets, he said.
“Our economy has not yet fully regained the jobs lost in the recession that accompanied the financial near-collapse,” he said.
“And our financial system — despite significant healing over the past four years — continues to struggle with the economic, legal and reputational consequences of the events of 2007 to 2009,” he said.
In addition to the lessons learned from the financial crisis, the more intensive monitoring was needed “because financial activities tend to migrate from more-regulated to less-regulated sectors,” Bernanke said.
“The second motivation for more intensive monitoring is the apparent tendency for financial market participants to take greater risks when macro conditions are relatively stable,” he added.
Bernanke sounded a note of caution about the recent record-setting rise in the US stock market as the Fed holds its near-zero key interest rate and pumps US$85 billion a month into bond purchases to support a weak economic recovery.
“In light of the current low interest rate environment, we are watching particularly closely for instances of ‘reaching for yield’ and other forms of excessive risk-taking, which may affect asset prices and their relationships with fundamentals,” he said.
“For the purpose of safeguarding financial stability, we are less concerned about whether a given asset price is justified in some average sense than in the possibility of a sharp move,” he said.
On Wednesday, the Dow Jones Industrial Average and the Standard & Poor’s 500-stock indices closed at record highs, with the broader S&P hitting an all-time record for five straight days.
Bernanke said that the implementation of the Dodd-Frank financial reforms was still being developed, including the treatment of the so-called “too-big-to-fail” companies deemed crucial to the health of the financial system.
Under the Dodd-Frank Act, the largest bank holding companies are treated as systemically important financial institutions (SIFIs) and have been subjected to Fed stress testing since 2009.
Bernanke said the US Financial Stability Oversight Council, created by the act, was in the process of naming nonbank financial companies as systemically important.
He said the central bank was developing market-based measures of systemic vulnerabilities and systemic risk, as well as network analysis, to better monitor the interconnectedness of financial institutions and markets.
Bernanke warned that shadow banking had “remaining vulnerabilities” that need to be addressed by regulators and the private sector.
There could be a run on money market funds if a fund should “break the buck,” or report a net asset value below US$0.995, as the Reserve Primary Fund did in 2008, he said.
“The risk is increased by the fact that the Treasury no longer has the power to guarantee investors’ holdings in money funds, an authority that was critical for stopping the 2008 run,” he said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”