Share

Liquidity rules for banks eased

Basel - The world's top banking regulatory body on Sunday eased the first global liquidity rules scheduled to start applying to banks in 2015 and aimed at improving their ability to survive financial crises.

The Basel Committee on Banking Supervision said at a press conference here that it had widened the definition of the easy-to-sell assets that banks will have to hold to survive periods of stress.

The Basel III standards had been initially proposed in 2010 but banks and financial institutions have since lobbied intensely to make the rules more flexible and result in lower costs for the sector.

The details of the Liquidity Coverage Ratio (LCR), which was drafted to avoid a repeat of the 2008 banking crisis and unanimously endorsed on Sunday by the Basel group's top oversight body, give the banks a reprieve.

Its provisions include a much broader definition of the minimum assets every bank needs to hold, making it less costly for them to maintain the required buffer.

"The changes to the definition of the LCR, developed and agreed by the Basel Committee over the past two years, include an expansion in the range of assets eligible as HQLA (high quality liquid assets)," the committee said.

The new LCR's full details will also be fully implemented only in 2019, instead of 2015 as initially proposed.

"Specifically, the LCR will be introduced as planned on 1 January 2015, but the minimum requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach 100% on 1 January 2019," the Basel group announced.

Mervyn King, Chairman of the Basel group's top oversight body and Governor of the Bank of England, described the agreement announced Sunday as "a very significant achievement."

"For the first time in regulatory history, we have a truly global minimum standard for bank liquidity," said King.

The Basel Committee brings together representatives regulators from 27 nations.

"Importantly, introducing a phased timetable for the introduction of the LCR, and reaffirming that a bank's stock of liquid assets are usable in times of stress, will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery," King said.

Stefan Ingves, chairperson of the Basel Committee and of Sweden's Sveriges Riksbank, said the global regulator could now focus on the Net Stable Funding Ration, another pillar of the Basel III reforms.

"The completion of this work will allow the Basel Committee to turn its attention to refining the other component of the new global liquidity standards, the Net Stable Funding Ratio, which remains subject to an observation period ahead of its implementation in 2018," he said.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent-ruolie
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders