Fed flags ‘elevated’ risk of financial stability pressures
System coped with immediate Covid-19 stresses, but trouble may be building, central bank says
The Federal Reserve warns there is an “elevated” risk that losses at financial institutions could generate financial stability “pressures” in the medium term.
In its financial stability report, published on May 15, the Fed notes banks went into the Covid-19 crisis with strong capital ratios. Banks have seen been able to absorb “surging demand” for credit lines while also building reserves for expected loan losses.
However, hedge funds went into the crisis highly leveraged, with some suffering
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