The easing of liquidity rules for banks just decided by the Basel Committee (an international forum) will not be applied automatically, according to sources at the European Parliament. The EP and Council will have to examine these new provisions as part of their negotiations on the reform of prudential rules for banks (CRD IV-CRR).
The CRD IV-CRR reform will adapt the Basel III financial reform to the European Union. The negotiations have been laborious but seem to be drawing to a conclusion. The next three-way talks will be held on 10 January and the goal is to come to an agreement before the end of this month.
On 6 January, the Basel Committee agreed to amend the provisions on short-term liquidity coverage ratio (LCR) contained in the new prudential rules decided in 2010, better known as the Basel III rules. The LCR promotes the short-term resilience of banks' liquidity risk profile. It requires them to hold high quality liquid assets that can be converted into cash easily to meet liquidity needs for a 30 calendar day liquidity stress scenario.
Among the adjustments announced on 6 January is a revised timetable for the application of this ratio by banks. The ratio will be introduced in 2015 as planned, but the Basel Committee decided to set up a four-year transitional period: banks will have to apply 60% of the requirements in 2015, rising to 100% in 2019.
The Basel Committee's agreement also expands the range of assets eligible as high quality liquid assets for meeting the liquidity coverage ratio.
"I welcome the unanimous agreement reached by the Basel Committee on the revised liquidity coverage ratio and the gradual approach for its phasing in by clearly defined dates. [ ] We now need to make full use of the observation period, and learn from the reports that the European Banking Authority will prepare on the results of the observation period, before formally implementing in 2015 the liquidity coverage ratio under...