The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
"Fire Sales" as a Driver of Systemic Risk in Tri-Party Repo and Other Secured Funding Markets
October 4, 2013
Overview “Fire sales,” actions involving the rapid sale of a large quantity of assets at a dislocated price, are a major systemic risk concern in financial systems that increasingly rely on short-term, secured sources of funding. Fire sales in one market can adversely affect all holders of the asset undergoing pressure in a range of markets beyond tri-party repo, as the reduced price of assets can lead to margin calls and further deleveraging and price declines.
This issue is a key risk concern for the U.S. regulatory community in the context of tri-party repo reform. The Financial Stability Oversight Council’s annual report notes that “The tri-party repo market remains vulnerable to runs by lenders in the event that concerns emerge regarding the financial condition of borrowers such as securities broker-dealers, who depend heavily on this channel for short-term funding.” The tri-party repo reform efforts under way are doing much to improve the stability of settlement arrangements in this important segment of the wholesale financing market. But they have yet to address the critical problems of runs and fire sales.
This workshop brings academics, regulators, and market participants together for a day of discussion to foster new thinking about ways to mitigate this financial stability risk concern.
Audience Attendance is by invitation only. Registration is closed.
Media This event is open to the media. Chatham House Rules will be in effect for all but the introductory and keynote remarks; media may report on comments made during the event, but may not attribute remarks to individuals or organizations. President Dudley's introductory remarks and Governor Stein's keynote remarks will be on-the-record. To register, please contact Andrea Priest at the New York Fed, firstname.lastname@example.org or (212) 720-6139.