The acting comptroller of the Currency at the US Office of the Comptroller of the Currency (OCC), Michael Hsu, issued remarks on bank liquidity risk. In his remarks, Hsu discussed the characteristics of recent bank runs and lessons learned from recent bank failures. He also discussed a targeted regulatory approach to better classify higher risk deposits, cover acute short-term outflows, and mitigate contagion risk.
He also highlighted how the adoption of faster payments and tokenization may impact liquidity risk management in the future.
“As the speed of banking and finance accelerates, so too does the need for better brakes to enable a safe and sound system. Some adaptation has already taken place through supervision on an individual bank-by-bank basis. Careful consideration also needs to be given, however, to targeted regulatory enhancements to help ensure that updated liquidity risk management practices are implemented and sustained systematically and consistently, especially across midsize and large banks.”