Of Special Interest


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10th January 2012

No delay on Basel III liquidity - peer review introduced

Liquidity capital requirements will be brought into effect under Basel III from 2015. Banks had been lobbying for a delay. There was signs of some softening regarding the rules over the weekend. The decisions followed a meeting of the the Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision on Sunday.

Specifically the acceptance that in times of stress some of the liquidity buffer may be used. Consideration is to be given as to how central bank emergency liquidity provision be included in the calculation. It was stressed that central banks should remain lender of last resort and not a routine source of liquidity.

The Basel process has been complicated and delayed in the past when the coordinating committees' members return to their own country / region and national interest steps in. To try and avoid the same fate it was also announced:

"The Committee will monitor, on an ongoing basis, the status of members' adoption of the globally-agreed Basel rules. It will review the compliance of members' domestic rules or regulations with the international minimum standards in order to identify differences that could raise prudential or level playing field concerns. The Committee will also review the measurement of risk-weighted assets to ensure consistency in practice across banks and jurisdictions.

"Against this background, each Basel Committee member country has committed to undergo a detailed peer review of its implementation of all components of the Basel regulatory framework. In addition to Basel III, the Committee will assess implementation of Basel II and Basel II.5 (ie the July 2009 enhancements on market risk and resecuritisations). The GHOS also endorsed the Committee's agreement to publish the results of the assessments. The Basel Committee will discuss and define the protocol governing the publication of the results. The GHOS also agreed that the initial peer reviews should assess implementation in the European Union, Japan and the United States. These reviews will commence in the first quarter of 2012."