US regulators are putting pressure on Wall Street banks to retain enough liquid funds to withstand a financial shock, in a move that could foreshadow a new regulatory regime if policymakers extend the Fed’s interim powers and let it take over from the SEC as the industry’s main regulator. In the past few months, the Fed has asked key investment banks to test their balance sheets to see how they would fare in a liquidity shortage or sudden downturn in capital markets. After the tests, which simulated a range of financial disruptions, regulators advised the banks how to improve liquidity and urged them to review frequently. All big Wall Street firms were asked to conduct the tests, said people familiar with the situation.

This entry was posted by Gwen Robinson on Monday, August 11th, 2008 at 5:34 and is filed under Capital markets. Edit this entry.