The Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidity as the U.S. steps up monitoring of risks from Europe's sovereign debt crisis, according to two people with knowledge of the matter.
Regulators held informal talks with some of the largest European lenders about producing a "fourth-generation daily liquidity" or 4G report, according to the people, who asked for anonymity because communications with central bankers are confidential.
The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps, said one person.
The U.S. has already increased the number of examiners embedded in these banks, the person said.
Concern is growing that European lenders may falter as Greece teeters on the brink of default. Timothy F. Geithner, secretary of the U.S. Treasury Department, has warned that failure to bolster European backstops would threaten "cascading default, bank runs and catastrophic risk" for the global economy.
"The Fed is trying to understand what the pressure points are in terms of liquidity and potential risks that are imposed by foreign banks to domestic institutions in our financial system," said Kevin Petrasic, an attorney with the Washington law firm of Paul, Hastings, Janofsky & Walker LLC.
"There is a little bit more sense of urgency as a result of what's going on in Europe," Petrasic said.
U.S.-based money funds, which buy short-term commercial paper, have been shunning securities issued by some banks based on the Continent. European Central Bank Governing Council member Yves Mersch said Sept. 28 that liquidity shortages pose the main risks to the region's banking system.
Jack Gutt, a spokesman for the Federal Reserve Bank of New York, declined to comment.
The largest European bank holding companies by assets in the United States include units of Deutsche Bank AG, HSBC Holdings PLC and Banco Bilbao Vizcaya Argentaria SA, according to Fed data. Spokesmen for the companies said they could not comment.
U.S. banks are starting to provide a 4G report and they are being phased in this month, said Karen Shaw Petrou, managing partner of Federal Financial Analytics Inc. in Washington
Some Europeans are asking their counterparts in the United States for information on how to prepare the report, even though there has been no formal request from the Fed so far, one of the people said.
"The report requires rapid and in some cases daily data on a banks' assets, liabilities and potential claims to measure the degree to which the bank could be caught in the classic borrow-short, lend-long squeeze," Petrou said. "The 4G is one of the tools to reveal liquidity risk."
The forms aren't public, according to Petrou, and the New York Fed declined to provide a copy.
Euro-zone banks and other financial institutions were more than $350 billion in debt to the Federal Reserve's emergency lending facilities at one point during the 2008-09 financial crisis, according to data compiled by Bloomberg News.
The analysis was based on Fed documents released earlier this year after court orders upheld Freedom of Information Act requests by Bloomberg LP, the parent company of Bloomberg News, and News Corp.'s Fox News Network LLC.
Fed lending to these entities totaled more than $100 billion on an average day.
