Fed notes that LCR could seriously disrupt bank lending and policy transmission (Premium)

In one of those moments where regulators make great policy points but miss a potentially disastrous avalanche up ahead, a new article from the Federal Reserve highlights that the Liquidity Coverage Ratio breaks a long-established monetary policy transmission mechanism related to bank lending. We add that this creates the conditions for a jaw-dropping liquidity freeze that could occur in the real world as a result of this same mechanism.

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