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Home Archive for category "Liquidity" (Page 4)
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Blackline of U.S. Liquidity Coverage Ratio Proposal: Federal Register Version vs. Draft Version

Today, the Office of the Federal Register released for public inspection the version of the U.S. liquidity coverage ratio (LCR) proposal that will be published in the Federal Register on November 29, 2013.  We have prepared a blackline of the rule text in the Federal Register version against the rule text in the Federal Reserve’s October 24 draft version of the U.S. LCR proposal.

A notable technical correction contained in the Federal Register version relates to the eligibility of a sovereign entity, U.S.…  Read More

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Federal Reserve Governor Tarullo Discusses Short-term Wholesale Funding and Potential Regulatory Remedies

Today, Federal Reserve Governor Daniel K. Tarullo delivered a speech discussing the potential financial stability concerns raised by short-term wholesale funding in the form of securities financing transactions (SFTs), which include repo and reverse repo, securities lending and borrowing, and securities margin lending transactions.  Governor Tarullo also discussed possible regulatory measures to address these concerns, including (1) regulatory capital surcharge calculated by reference to a firm’s reliance on SFTs and other forms of short-term wholesale funding (2) modifications to capital and liquidity standards such as standardized banking book risk weights, trading book capital charges and Basel III net stable funding ratio (NSFR) and (3) universal margin requirements for SFTs.…  Read More

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Federal Reserve Governor Stein Discusses Fire-sales Problem Associated with Securities Financing Transactions and Potential Policy Remedies

Today, Federal Reserve Governor Jeremy C. Stein delivered a speech discussing the fire-sales problem associated with securities financing transactions (SFTs) and potential policy remedies, including a liquidity-linked capital surcharge, modifications to liquidity standards such as the Basel III net stable funding ratio (NSFR) and universal margin requirements for SFTs.

Existing Regulatory Tools:  In his speech, Governor Stein argued that “the mainstays of our existing regulatory toolkit–risk-based capital, liquidity, and leverage requirements–have a variety of other virtues, but none seem well-suited to lean in a comprehensive way against the specific fire-sale externalities created by SFTs.”

New Regulatory Tools:  Governor Stein went on to consider other tools that might be better suited to dealing with SFT-related fire-sales externalities. …  Read More

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U.S. Basel III Liquidity Coverage Ratio Proposal: Visual Memorandum

The U.S. banking agencies have issued a proposal to implement the Basel III liquidity coverage ratio (LCR) in the United States. The LCR requires large banking organizations to maintain a minimum amount of liquid assets to withstand a 30-day standardized supervisory liquidity stress scenario. The U.S. LCR proposal is more stringent than the Basel Committee’s LCR framework in several significant respects.

Davis Polk’s visual memorandum uses diagrams, flowcharts, timelines, examples and comparison tables to illustrate key aspects of the U.S. LCR proposal.…  Read More

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Overview of Basel Committee’s Proposed Liquidity Coverage Ratio Disclosure Standards

Today, the Basel Committee proposed a set of liquidity coverage ratio (LCR) disclosure standards.  Part of the Basel III liquidity framework, the LCR requires a banking organization to maintain a minimum amount of liquid assets to withstand a short-term liquidity stress period.  Specifically, the LCR requires a banking organization’s stock of unencumbered high-quality liquid assets (HQLAs) to be at least 100% of its total net cash outflows over a 30-day standardized supervisory liquidity stress scenario.  Following is a high-level overview of the Basel Committee’s proposed LCR disclosure standards.…  Read More

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Federal Reserve Governor Tarullo Previews Additional Capital Standards for U.S. G-SIBs

In his statement at today’s open meeting to approve the U.S. Basel III final rule, Federal Reserve Governor Daniel K. Tarullo previewed “four rulemakings that will enhance capital requirements for the eight U.S. banking organizations already identified as of global systemic importance.”  Governor Tarullo described these four rulemakings for the 8 U.S. G-SIBs as being in various stages of development.

1.  Higher Basel III Leverage Ratio:  According to Governor Tarullo, the U.S. banking regulators are very close to issuing a proposal to establish a leverage ratio for the eight U.S.…  Read More

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