08 October 2013

IBFed: Response to the Basel Committee's consultation on liquidity coverage ratio disclosure standards

The International Banking Federation commented that the proposed disclosure regime would require internationally-active financial institutions to make public their LCR and certain of its components through a common template.

Additionally, financial institutions would be expected to explain their LCR results and overall liquidity position with the same frequency as, and concurrently with, their financial statements.

IBFed understands and support the Basel Committee’s efforts to both enhance market transparency and standardise LCR disclosure. In general, IBFed and its members do not object to periodic lagged disclosure of the LCR; however, IBFed is concerned about the potential adverse effects that may arise from the publication of detailed information about a financial institution’s liquidity position. As the Basel Committee notes in the proposal, there are challenges with granular liquidity disclosures, particularly during times of stress. Moreover, IBFed notes that required disclosures, as presented in the consultative document, will negate the LCR transition period and likely prohibit financial institutions from using their buffers in times of stress, as the Basel Committee intends.

Given these challenges, the IBFed urges the committee to further consider whether the consultative document achieves the appropriate trade-off between transparency and the potentially destabilising impacts of disclosing information about a financial institution’s liquidity position, particularly during times of stress. The IBFed strongly urges the Basel Committee to, at a minimum, recommend jurisdictions implement a timeline that would delay public disclosure until such time as the LCR has been fully transitioned into all jurisdictions, and financial institutions, supervisors and market participants have had a chance to adapt to and understand the LCR and its drivers.

IBFed’s detailed comments on the consultative document are in following areas:

• Public disclosure of liquidity information
• Use of daily averages
• Scope of application
• Market education
• Alignment with other liquidity disclosure requirements
• Effective date

Full comments

Original consultation

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