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Vivienne Kelly
A group of the world’s top regulators and central bankers has agreed to relax global liquidity standards after pressure from the banking industry.
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The Basel Committee on Banking Supervision has made it easier for banks to meet the “liquidity coverage ratio” (LCR), and delayed its full implementation until 2019.
“The LCR is one of the Basel Committee’s key reforms to strengthen global capital and liquidity regulations with the goal of promoting a more resilient banking sector,” a statement from the Bank for International Settlements said.
“The LCR promotes the short-term resilience of a bank's liquidity risk profile. It does this by ensuring that a bank has an adequate stock of unencumbered high-quality liquid assets that can be converted into cash easily and immediately in private markets to meet its liquidity needs for a 30 calendar day liquidity stress scenario. It will improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy.”
The deadline for meeting 100 per cent of the requirement is now 1 January 2019. Banks will have to meet 60 per cent of the required liquidity by 2015, the original deadline.
Australian banks, however, will have to wait and see if the Australian Prudential Regulation Authority (APRA) will endorse the amendments.
According to a report in The Australian newspaper, a Commonwealth Bank spokesperson said “this is an interesting development, but the impact on Australian banks will only be known once APRA has come out with its guidelines, which may be different.”
APRA has thus far declined to comment.
