☰

M. Continuo

Fed's Tarullo says shadow banking creates risks


    WASHINGTON (Reuters) - A top Federal Reserve official on Tuesday renewed a call for tighter rules governing the so-called shadow banking system, in which financial firms exchange large amounts of cash, to prevent a repeat of the panic that provoked the financial crisis of 2007-2009.

    Fed Governor Daniel Tarullo did not comment on the outlook for the economy or monetary policy in the speech, which covered similar ground to remarks he made last month.

    Tarullo said that despite financial reforms, the shadow banking system has the potential to destabilize the broader financial system.

    "The shadow banking system ... has only been obliquely addressed, despite the fact that the most acute phase of the crisis was precipitated by a run on that system," Tarullo said in remarks prepared for delivery to a conference organized by the San Francisco Fed in San Francisco.

    (Reporting By Mark Felsenthal; Editing by Padraic Cassidy)