Recent Studies Reinforce Case for the Liquidity Coverage Ratio

Summary: Drawing mainly on the recent EBA impact assessment, this VOX piece examines the implementation of the Liquidity Coverage Ratio (LCR) in the EU, which is due by December 31st, 2014. The recalibration of the LCR in January 2013 watered down the standard significantly. Nevertheless, banks in the EU still feature substantial liquidity risk exposure. To […]

The Liquidity Coverage Ratio Under Siege

In the aftermath of the outbreak of the economic and financial crisis in August 2007, the world’s most important regulators and supervisors quickly arrived at the conclusion that international liquidity regulation must not only be harmonised, but also improved substantially.[1] In December 2010 the Basel Committee of Banking Supervision published Basel III: International framework for […]

Room for Manoeuvre: The Deleveraging Story of Eurozone Banks Since 2008

Europe’s banks are raising their capital-asset ratios to meet regulatory requirements. Many fear that this will trigger a contractionary shrinking of assets. This column presents new evidence that much of the ratio increases since 2009 have come fro new capital rather than reducing exposure to the real economy. Investor trust in European banks has dwindled, […]

Next-Generation System-Wide Liquidity Stress Testing

The global financial crisis has shown that neglecting liquidity risk comes at a substantial price. This column presents a new framework to run system-wide, balance sheet data–based liquidity stress tests. The liquidity framework includes a module to simulate the impact of bank-run type scenarios, a module to assess risks arising from maturity transformation and rollover […]