Basel III imposes boost of liquid assets

Stefan Ingves declared that the Basel group plans to put standardised implementation of the Basel III reforms at the top of its agenda.

The new chairman of the Basel Committee on Banking Supervision has warned that, despite concerns rule changes could have a damaging effect on the wider economy, global banking regulators will press ahead with the first worldwide effort to pressure banks into holding more liquid assets, and to cut back the industry’s reliance on short-term funding.

In his first interview since accepting the chairmanship, Stefan Ingves, who also heads the Swedish Central Bank, declared that the Basel group plans to put standardised implementation of the Basel III reforms at the top of its agenda.

An agreement was decided last year by the 27 member countries and will force banks to hold more top quality capital against unexpected losses. However, there is some uncertainty as to just how many countries will keep to the arrangement.

Mr Ingves stated: “It is going to be all about implementation in as uniform a way as possible. Balkanisation of the rules over the long term is not in anyone’s interest.”

In an attempt to ensure compliance, the committee has announced it will publish ‘heat’ maps which will indicate which countries are following the reform. Teams of experts will be dispersed to look at whether each country’s implementation of the laws and regulations lives up to the agreement.

The Basel group is finalising the particulars on two liquidity rules; the liquidity coverage ratio, which would necessitate that banks hold enough liquid assets to survive a 30-day crisis, and the net stable funding ratio, which would force more long-term funding from financial institutions.

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