US bank liquidity plan: the market reacts

Author: Zoe Thomas | Published: 29 Oct 2013
  • In general, the US has taken a conservative line in its proposed liquidity coverage rule to meet Basel III requirements ;
  • But smaller banks may be in a tough position as they try to meet new requirements; estimates about the funding shortfall may be greater than expected due to a lack of information about the these banks’ positions;
  • Major questions also remain about whether some banks may need to change their business model to meet proposed liquidity requirements.

Last Thursday, the US Federal Reserve announced its proposed rule to meet the Basel III liquidity requirements. It has prompted concerns about short-falls in liquidity, as well as how medium-sized institutions will cope.

The proposed ratio would require certain banks - those with over $250 billion in assets or significant international holdings - to maintain 30-days worth of liquid assets.

And one concern for both large and medium-size banks going forward will be the cost...



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