Magazine article American Banker

Banks Urge U.S. Regulators to Change Liquidity Rules

Magazine article American Banker

Banks Urge U.S. Regulators to Change Liquidity Rules

Article excerpt

Byline: Donna Borak

WASHINGTON -- Seven industry trade groups representing the largest U.S. financial institutions are calling on U.S. regulators to revise a proposed liquidity requirement to reflect changes made by global regulators.

In a joint 89-page letter to the three banking regulators, the trade groups expressed unease over the differences between the Basel Committee on Banking Supervision's finalized rule regarding the so-called Liquidity Coverage Ratio as compared to the U.S. plan.

While the groups endorsed the necessity for a liquidity requirement for the largest financial institutions, they disagreed there should be any divergence in how the rule is applied to U.S. institutions versus global counterparts.

"We are concerned, however, that certain aspects of the U.S. agencies' proposal diverge from the standards established by the Basel Committee in ways that generally are not warranted, and so encourage the agencies to revisit the proposal to improve the accuracy and suitability of the LCR as a measure of actual liquidity risk," David Wagner, the Clearing House's executive managing director and head of finance affairs said in a press release announcing the letter.

The letter was signed by the Clearing House Association, Securities Industry and Financial Markets Association, the American Bankers Association, Financial Services Roundtable, Institutional of International Bankers, the International Association of Credit Portfolio Managers and the Structured Finance Industry Group.

Under the U.S. proposal, which regulators unveiled in October, banks must hold high-quality liquid assets for over a 30-day period to help lessen the impact of any financial shocks.

Global regulators finalized a similar rule, but opted last year to expand the types of high-quality liquid assets and give banks more time to build up their buffer. …

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