BIS: Basel III: The liquidity coverage ratio and liquidity risk monitoring tools/EC: CRD 4

BIS met on 6 January 2012 to consider amendments to the liquidity coverage ratio. A summary description of the agreed LCR is in Annex 1. The changes to the definition of the LCR include an expansion in the range of assets eligible as high quality liquid assets and some refinements to the assumed inflow and outflow rates to better reflect actual experience in times of stress. These changes are set out in Annex 2. The full text of the revised LCR was published the following day and appears in the second link below. It was agreed that the LCR should be subject to phase-in arrangements which align with those that apply to the Basel III capital adequacy requirements. 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. It was further agreed that that, during periods of stress it would be entirely appropriate for banks to use their stock of high quality liquid assets, thereby falling below the minimum and that it was the responsibility of bank supervisors to give guidance on usability according to circumstances. BIS also noted plans to review the net stable funding ratio. In addition, a new charter for the Basel Committee has been published. The EC has published a statement by Michel Barnier in which he discusses the implications for CRD 4.