Fed's Rosengren: Brokers Must Disclosure More About Repo Positions

Broker-dealers should be forced to disclose much more information than they do now about their activities in the overnight repo markets, said Eric Rosengren, the president of the Boston Fed, on Wednesday. Greater disclosure would allow investors and analysts to understand whether the broker is facing a "run risk" last seen in the financial crisis, Rosengren said in a speech prepared for delivery to a conference of international bank regulators in Lima, Peru. Data uncovered after the bankruptcy of Lehman Brothers show how acute the withdrawal of funding was for the troubled company months before the firm collapsed, he said. Rosengren said it was a mistake to assume that this risk had been mitigated now that most broker-dealers in the U.S. are bank holding companies. U.S. bank laws discourage bank capital from being used to help struggling subsidiaries, he said. Disclosure will not be sufficient, Rosengren said. A capital charge for short-term wholesale funding would also help, he said.

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