The Federal Reserve could order a financial institution to sell a risky division or stop dangerous trading activity if the central bank determined there was a threat to the US financial system, under a draft law released on Tuesday. The landmark bill, drawn up by the Treasury and the House financial services committee, aims to establish a council of regulators charged with snuffing out systemic risks. Powers would extend to foreign groups with large or risky US subsidiaries. So-called “heightened prudential standards” would include leverage limits, liquidity rules and the drafting of a resolution plan, or “living will.”

This entry was posted by Paul Murphy on Wednesday, October 28th, 2009 at 4:10 and is filed under Capital markets. Tagged with federal resereve. Edit this entry.