(Adds comment, background in third and fourth paragraphs)
April 20 (Reuters) - The unprecedented speed at which
depositors pulled their money from Silicon Valley Bank outpaced
the ability of the Federal Reserve to act as lender of last
resort, underscoring the need for faster processing of emergency
loans, Fed Governor Christopher Waller said on Thursday.
Since the run on SVB that forced regulators to shut it down
in mid-March, "things have kind of calmed down" in the banking
sector, said Waller, who last week signaled that bank-sector
calm is one reason he believes the Fed can and should continue
to focus on fighting high inflation with further policy
tightening. "That's the one thing about a bank run - it's a
panic; once it stops, there's no real fundamental damage to the
economy or the banking system per se."
The Fed is currently undertaking a review of what led to
SVB's failure, and what policy fixes might be needed to avert a
repeat. Waller's comments on the need for speed at the Fed's
emergency lending "discount window" suggests one potential fix.
"If they are going to have deposit flows being faster we
need to think how do we do pricing faster, how do we do
assessment of the collateral, that's got to be faster -- that's
one of the things I personally learned from this: to make the
discount window more effective, we have to be able to do things
faster as well," Waller said.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama and Andrea
Ricci)
