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Banks given leeway on crisis buffers

Banks have been given more time to introduce measures designed to mitigate against financial shocks by global regulators.

A decision by the Bank for International Settlements, made up of 27 countries, means banks now have longer to build up liquidity buffers to combat the effects of a financial crisis.

The Liquidity Coverage Ratio (LCR) is the minimum standard pot of assets that banks must hold, and the Basel Committee on Banking Supervision has amended the timetable for implementation of the rules.

In periods of “stress,” and in the transition period, regulators say banks can drop below the minimum standard.

Mervyn King, Chairman of the GHOS and Governor of the Bank of England, said: “The Liquidity Coverage Ratio is a key component of the Basel III framework. The agreement reached today is a very significant achievement. For the first time in regulatory history, we have a truly global minimum standard for bank liquidity.

“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.”

This was posted in Bdaily's Members' News section by Tom Keighley .