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Banks Secure Basel III Concessions

The FT reports that banks have won a significant concession in relation to the Liquidity Coverage Ratio (“LCR”), one of the main pillars of the Basel III reforms.

The LCR requires banks to hold a sufficient amount of liquid assets to allow them to survive a short-term market crisis. Previously, only government bonds and highest quality corporate bonds were eligible for inclusion within the LCR calculation. However, banks will now be entitled to include a much wider variety of assets within their LCR calculations, including corporate bonds rated as low as BBB-, some equities and high-quality mortgage-backed securities. Moreover, full compliance with the LCR rules will not be required until 2019, four years later than was originally expected.

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