LONDON The Basel Committee of regulators from nearly 30 countries agreed on Sunday to ease a new rule forcing banks to build cash buffers to protect against any month-long market squeeze.
The Liquidity Coverage Ratio (LCR) rule is one of the world's main regulatory responses to the financial crisis. The following are the main changes to an earlier draft.
* Instead of full compliance in January 2015, banks will have to hold only 60 percent of their buffer by then, rising 10 percent annually thereafter to full compliance by January 2019.
* The list of assets eligible for inclusion is widened from highly rated government and corporate debt to include retail mortgage backed securities, lower rated corporate debt and shares. New inclusions face a 25 to 50 percent discount.
At least 60 percent of the buffer must still be in highly-rated government debt and the newly eligible assets cannot count for more than 15 percent of the overall buffer.
* The stress scenario a bank must use to determine the size of its buffer, aimed at keeping the bank funded for 30 days in a squeeze, is eased, meaning the overall buffer will be smaller.
* Explicit acknowledgement that the liquidity buffer can be tapped to below minimum levels in times of stress, even during the phase-in period, a provision aimed at helping banks in stressed euro zone countries in particular.