12/3/2015, 7:55 PM (Source: TeleTrader)
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Fischer: Shadow banking out of grasp

As the dollar's index was more than 2% down on Thursday, nearing a dive of almost 3% against the euro, the vice chairman of the Federal Reserve Stanley Fischer told attendants at a financial conference that there are developments in shadow banking which remain hard to track, and that "interconnections across the financial system are hard to measure." He explained tighter monetary policy may shift activities from area to area.

"History has demonstrated that risks evolve in response to regulatory pressure and the animal spirits that emerge as memories fade, as well as to animal spirits. As a result, the infrastructure needed to learn the things we don't know needs to be put in place," Fischer stressed, summarising his speech, during which he cited the historically high levels of regulatory capital ratios, still trending upward. The Fed's official noted there is still a lack of a full view of non-bank firms.

"Conditions can change quickly. And important blind spots in our view of the financial system remain, in part owing to data gaps. When it comes to financial stability, what you do not know really can hurt you – and there remains a good bit we do not know," according to Fischer's draft speech.

The dollar's indicator made of a basket of currencies slumped 2.06% at 7:55 p.m. CET. At the same time, the greenback trailed the euro by 3.02%, extending earlier losses, and it was down 2.4% versus the Swiss franc.

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