U.S. Regulators Go For “Super-Equivalent,” Stringent Liquidity Standards
Almost three years after Basel III released its liquidity rules and ten months after a final revision (see FSM Report LIQUIDITY9), the U.S. banking agencies today released their proposed approach to this critical prudential issue. This report assesses FRB action on a sweeping proposal that will be released for a ninety-day comment period by all of the banking agencies. This will of course push implementation into next year, but FRB Vice Chair Yellen today made clear that, while she questions several aspects of the NPR, she will strongly support it if confirmed to chair the central bank. Combined with new systemic liquidity risk-management standards (see FSM Report SYSTEMIC54), the proposed liquidity coverage ratio (LCR) will make the U.S. framework the toughest one for large banks and BHCs. FRB governors today sought to emphasize compatibility with global rules by calling the U.S. proposals “super-equivalent,” but the new framework in practice will lead to heightened questions about the ability of the Basel process to craft comparable cross-border requirements.

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