Global regulators allow banks to meet liquidity requirements until 2019
Basel, Switzerland (4E) – Banks were given four extra years by global central bank officials to meet international liquidity requirements under less stringent measures aimed to prevent another credit crunch.
Based on a previous draft crafted two years ago, banks would have until 2015 to meet these requirements, but the latest agreement extended the deadline to 2019.
The new rules state that banks are required to hold sufficient cash and liquid assets to protect them from collapsing during a 30-day crisis.
Banks were successful in securing an extension to fully meet the liquidity coverage ratio (LCR) after an agreement was struck by regulatory officials in a meeting on Sunday in Basel, Switzerland.
The deal marks the first time international liquidity rules will be in force for banks worldwide. Strengthening the banks’ reserves would make them less vulnerable during crisis when large number of customers try to withdraw their money.
Last year, the Basel Committee on Banking Supervision had difficulty reaching an agreement on how to revise the LCR. With still no final deal at the final month of the year, central bank and regulatory authorities were left to make a final decision.
In a survey of 209 banks by the Basel committee, it shows a collective shortfall of assets amounting to 1.8tn euros ($2.4tn) by the end of 2011 to meet the 2010 LCR requirement.