The leading economist’s open letter to the Federal Reserve Bank of New York calls for new liquidity standards for banks.

NEW YORK CITY, NEW YORK, UNITED STATES OF AMERICA, May 2, 2023/ — Ivaylo Angelov, a leading economist, has sent an open letter to the Federal Reserve Bank of New York proposing new liquidity standards for banks. In the letter, Angelov calls on the Fed to set new liquidity standards for banks, among other proposals, to better protect the country’s challenged banking system.

The move comes weeks after the collapse of Silicon Valley Bank, the largest bank failure in the United States since the global financial crisis, and in the midst of First Republic Bank’s spiral. In the letter, Mr. Angelov expressed concern about the stability of the banking system and highlighted the need for stronger liquidity standards to ensure that banks can weather unexpected shocks.

“The recent collapse of Silicon Valley Bank highlights the importance of strong liquidity standards for banks,” said Mr. Angelov in the letter. “Banks should be required to maintain a high level of liquidity to ensure that they can meet their obligations in all circumstances. The proposal is for banks to hold a minimum of 30% of their assets in liquid form, which will enable them to weather unexpected shocks.”

Each of Mr. Angelov’s proposals are in line with the Basel III liquidity standards, which require banks to maintain a 100% LCR, or liquidity coverage ratio, which means holding an amount of highly liquid assets that are equal to or greater than its net cash flow, over a 30-day stress period. He also argues that the current standards are not sufficient to ensure the stability of the banking system and that additional measures are necessary and advocates for more frequent stress tests and real-time monitoring of bank liquidity.

Since issuing his open letter, Mr. Angelov’s proposals have received widespread attention and are being viewed as a significant contribution, including by regulators, to the ongoing debate about the stability of the banking system. To read the open letter, click here.

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Article originally published on as Ivaylo Angelov Pens Open Letter on Liquidity Requirements with the Federal Reserve

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