April 15 (Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Thursday called for Treasury market reforms and renewed scrutiny on hedge funds and other nonbank financial entities to help plug financial system vulnerabilities that could reemerge in the next big shock. Two times in the last 12 years the Fed has had to step into roiled financial markets to stabilize them, most recently last March when investor panic over the emerging COVID-19 pandemic caused the U.S. Treasury market to seize up. The central bank responded by injecting trillions of dollars of liquidity into the financial market. “Stepping back from the crisis and the unique features of the shock, the events of last March raise questions about the resiliency of intermediation in the Treasury market during periods of market stress,” Daly said in remarks prepared for delivery to the Money Marketeers of New York University. She raised a number of potential fixes, including creating a standing repurchase facility to backstop markets during times of stress, expanding trading platform access to more entities, and using central clearing for Treasury cash markets to “reduce the burden on broker-dealers and lessen the liquidity crunch in times of stress.” For all, she said, careful study of both benefits and costs are required. But given that the Fed needs to keep interest rates low for a long time to bolster the recovery, and will likely need to do so again during future downturns, the central bank needs to figure out how to better manage and prevent future financial market meltdowns and keep high levels of borrowing from posing systemic risks, she suggested. “Looking beyond the direct functioning of the Treasury market, the stability of hedge funds and money market funds is an important priority” and shoring up their resiliency is “critical,” she added. “New risks emerge as the economy evolves and we need to ensure that we are prepared for what is ahead.” (Reporting by Ann Saphir Editing by Chizu Nomiyama)