On May 1, 2016, Federal Reserve Bank of New York President William Dudley delivered remarks at the Federal Reserve Bank of Atlanta 2016 Financial Markets Conference, focusing on the connection between liquidity and financial stability. Dudley first addressed market liquidity, noting that evidence that market liquidity has diminished is mixed. Turning to funding liquidity, Dudley emphasized the link between funding liquidity and capital requirements and asked whether more should be done to support funding liquidity. Dudley noted the importance of the availability of a lender-of-last resort, and remediating any gaps in the lender-of-last-resort function. As an example, Dudley noted the limited ability of the Federal Reserve Board to provide funding to a securities firm, even on a fully collateralized basis, and suggested that providing such firms with access to the Discount Window “might be worth exploring.” Dudley also noted that the Bank for International Settlement's Committee on the Global Financial System is engaged in a project to determine what lender-of-last-resort gaps currently exist, focusing, in particular, on those that may create vulnerability in terms of financial stability. One area that he anticipates will receive considerable attention is whether there are any gaps with respect to the activities of globally systemic firms that operate on a cross-border basis. He also noted that greater attention needs to be paid to the appropriate role for the home- versus host-country supervisor and that the regulatory and supervisory responses for large, systemically-important firms that operate on a cross-border basis need to be closely coordinated, especially during times of stress. Dudley stressed that expectations about who will be the lenderof-last-resort need to be well understood in both the home and host countries.

President Dudley’s speech is available at: https://www.newyorkfed.org/newsevents/speeches/2016/dud160501.