FedFin Assessment: Treasury Liquidity Recommendations Double Down on Capital Relief
We here continue our series of analyses of the policy and market impact of Treasury’s far-reaching reform report, focusing now on proposed changes to the U.S. liquidity framework for large banking organizations. As noted in our assessment of Treasury’s approach to capital regulation (see Client Report CAPITAL216), the liquidity discussion is based on the cumulative impact of the capital standards along with other relevant rules. Treasury concludes that these interactions have led covered banks to hold 24 percent of their balance sheets in eligible high-quality liquid assets (HQLAs).