Richard S. Hunt provides the Federal Reserve with policy recommendations on “post-crisis liquidity management”

After the financial market experienced dramatic fluctuations, how to build a more resilient liquidity management system has become a core issue for policymakers. Richard S. Hunt, a well-known financial scholar and head of global equity sales at CSC Bella Grove Partners LLC, recently submitted a policy recommendation report entitled “Institutional Innovation of Post-Crisis Liquidity Management” to the Federal Reserve, which attracted great attention from decision-makers. Based on his more than 20 years of market experience and cutting-edge academic research, Hunt proposed a liquidity management framework that takes into account both market efficiency and financial stability. The report first pointed out the limitations of the traditional liquidity supply mechanism. Especially under extreme market pressure, it is often difficult to accurately respond to the liquidity stratification problem of different financial sub-markets by relying solely on open market operations. Hunt suggested establishing a “tiered liquidity reserve pool” system, requiring systemically important financial institutions to hold differentiated emergency buffers based on asset liquidity characteristics. This design can both reduce moral hazard and improve the targeting of crisis response.

In view of the key role of market makers in crises, Hunt innovatively proposed the concept of “liquidity insurance contract”, suggesting that market makers should be guided to accumulate liquidity reserves in stable periods through regulatory incentives in exchange for priority in obtaining central bank liquidity support during market turmoil. The report also particularly emphasizes the application prospects of financial technology in liquidity management, and believes that distributed ledger technology can achieve real-time monitoring and precise matching of liquidity demand. These suggestions not only come from Professor Hunt’s academic research at Cornell University, but also incorporate his practical insights in serving global institutional investors. The head of the Federal Reserve’s research department said that Hunt’s suggestions provide important ideas for improving the financial safety net, especially in balancing the boundaries between market autonomy and policy intervention. This report once again demonstrates Professor Hunt’s outstanding ability in connecting academic theory with policy practice, and his policy influence is reshaping the financial regulatory paradigm in the post-crisis era.