EBF welcomes the revisions to the Liquidity Coverage Ratio (LCR) just endorsed by the Group of Governors and Heads of Supervision (GHOS), the BCBS oversight body, and agrees with the GHOS that the LCR is an essential component of the Basel III reforms.
EBF stresses that it has been one of the key concerns for Europe’s banks in the Basel III proposals, where the initial definition would have impacted most severely the capacity of banks to support economic recovery.
The changes incurred by the revision of the LCR, which expands the range of assets eligible as High Quality Liquid Assets (HQLA), will facilitate the selection of liquid assets for banks. Banks would otherwise have to draw from a rather limited pool of cash, sovereign bonds and central bank reserves.
EBF is also satisfied that the lower outflow rates based on the experience in the current crisis will now lead to a less conservative calculation of the LCR. It also very much favours the timetable for phase-in of the LCR standard put forward by the Basel Committee.
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© EBF
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