The LCR is the first-ever attempt by regulators to introduce a global unified framework that ensures that banks possess a pool of ostensibly liquid assets for at least 30 days during a liquidity crisis, without recourse to central bank support.
Notoriously, when the LCR was framed in December 2010, it required banks to build up large buffers of high-quality liquid assets, tightly and rather conveniently at a time of investor outflows from sovereign debt, to protect against a rapid flight of deposits and short-term funding in a crisis.
Banks complained they were being compelled to hold low-yielding and capital-consuming government debt with dubious liquidity and credit profiles, restricting earnings and organic capital building while constraining capacity to lend to the economy.
However, triggering fear and cheer, in equal measure, in January, the Basel Committee backed down to a degree, accepting that the earlier framework was excessive, and has now permitted a broader pool of assets, including ABS, and a more relaxed implementation timeline for the landmark liquidity framework.
Recent Euromoney LCR coverage
Schizophrenic regulators killing securitization
April 2013
BoE King throws another grenade into bank-regulation debate in bid to shape legacy
March 2013
Lighter rules to lift lending
March 2013
International cash management banks adapt to a tough new world
March 2013
Supply chain finance: The chain takes the strain
March 2013
New liquidity rules prompt mutual back scratching between banks and corporates
February 2013
Basle committee: Regulators climb down over liquidity
February 2013
Critics see regulatory capture in new LCR
February 2013
Trade finance fears remain despite Basel shift
January 2013
 |
| Mervyn King, Bank of England governor and chairman of the oversight body at Basel |
Mixed messages from Basel on ABS in Europe
January 2013
Liquidity management debate: Liquidity management in an age of anxiety
September 2012
Time to row back on bank regulation?
March 2012
Can ABS rescue Europe’s bank-funding market?
March 2012
Liquidity management debate: Preserving liquidity in a challenging world
September 2011