Balance Sheet Normalization

Balance Sheet Normalization

The practice of returning a balance sheet to its usual size. For example, if a company has taken on an unusual amount of debt to pay for a special circumstance, balance sheet normalization may involve repaying the debt in short order. For instance, it may not renew bonds when they mature.
References in periodicals archive ?
On the balance sheet normalization, the Fed chair agreed the portfolio is expected to be brought down to about $2 tln, but should be no larger than need be.
It would require coordination between the Fed and Treasury, but the Fed could adjust the ongoing balance sheet normalization by rolling some of the MBS proceeds into bills.
This was despite the boost to the greenback after US Federal Reserve officials signaled to begin balance sheet normalization and maintained forecasts to raise interest rates again this year.
In October, the Committee will initiate the balance sheet normalization program," which it instituted following the 2008 financial crisis, the Fed announced.
com)-- Federal Reserve Bank Chair Janet Yellen testified that the Fed will likely continue its plans to implement federal funds rate hikes and balance sheet normalization measures in order to gradually raise short and long-term interest rates.
The Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.
More on balance sheet normalization and the debt: Powell expects a more normal balance sheet, at about $2 tln, in about 3-5 years.
As we approach 2018, there are a number of factors that have the potential to derail the bull case -- Federal Reserve tightening and balance sheet normalization, interest rate action from the Bank of Japan and European Central Bank, potential Trump administration policy missteps, the risk of open conflict with North Korea, high equity valuations and low bond spreads.