Federal Reserve's Bowman: Review the effectiveness of liquidity regulation framework and reform the discount window mechanism

SmartContractAuditor · 2026-03-04T03:41:20+00:00

Federal Reserve's Bowman emphasized at the roundtable that there is a need to reassess the banking liquidity regulation framework, questioning whether current measures truly enhance financial resilience. He mentioned the need to reform the discount window, eliminate the phenomenon of banks hoarding liquid assets to prevent credit supply contraction and increased reserve requirements. In the future, regulatory impacts on bank behavior and the economy should be a focus.

SmartContractAuditor

2026-03-04 03:41:20

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Odaily Planet Daily reports that Federal Reserve Board member Bowman delivered a speech titled “Liquidity Resilience, Financial Stability, and the Role of the Federal Reserve” at a roundtable hosted by the Capital Markets Regulatory Committee. She pointed out that, 15 years after the global financial crisis, it is necessary to reassess whether the current bank liquidity regulatory framework truly enhances financial system resilience, rather than just appearing effective on paper. The current prudent liquidity framework mainly includes tools such as the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), Internal Liquidity Stress Testing (ILST), and contingency planning, which theoretically help banks cope with short-term withdrawals and long-term market shocks. Without fundamental reform of the discount window to make it a truly available and rule-consistent liquidity backstop, the banking system will continue to build additional buffers by stockpiling high-quality liquid assets, thereby constraining credit supply and increasing demand for reserves, which forces the Fed to maintain a larger balance sheet. Future reforms should focus on whether regulatory requirements genuinely translate into systemic resilience and carefully evaluate the potential impacts of liquidity regulation on bank behavior and the macroeconomy.

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