Basel III Global Liquidity Standards: Critical Discussion and Impact onto the European Banking Sector

Veronika Bučková; Svend Reuse

Basel III Global Liquidity Standards: Critical Discussion and Impact onto the European Banking Sector

Vol.2,No.3(2011)

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Together with the Basel III regulatory equity rules, two liquidity ratios have been published. Resulting from the illiquidity of some banks during the financial crisis in 2008, these ratios shall help to prevent further crisis in the European banking sector. But do they really fulfill their aim? This article presents the new liquidity ratios, the actual liquidity situation in banks and describes the consequences for banks at a simplified example. It has to be stated that implementing more detailed liquidity frameworks into the banking supervision process is necessary. The financial crisis in 2008 showed that several banks did not have adequate liquidity risk models and processes to prevent illiquidity. But the LCR and the NSFR seem to be wrong methods. Both ratios will increase. The implementation of both ratios has to be done very carefully in order to prevent this.

Keywords:
Basel III; liquidity coverage ratio LCR; net stable funding ratio NSFR; maturity transformation

References

Basel Committee on Banking Supervision (2010.08). An assessment of the long-term economic impact of stronger capital and liquidity requirements. Retrieved from: http://www.bis.org/publ/bcbs173.pdf, accessed on September 6, 2011.

Basel Committee on Banking Supervision. (2010.09). Group of Governors and Heads of Supervision announces higher global minimum capital standards. Retrieved from: http://www.bis.org/press/p100912.pdf, accessed on September 6, 2011.

Basel Committee on Banking Supervision. (2010.12). Basel III: International framework for liquidity risk measurement, standards and monitoring. Retrieved from: http://www.bis.org/publ/bcbs188.pdf, accessed on September 6, 2011.

Basel Committee on Banking Supervision (2011.06). Basel III: A global regulatory framework for more resilient banks and banking systems. Retrieved from: http://www.bis.org/publ/bcbs189.pdf, accessed on September 6, 2011.

Frère, Eric / Reuse, Svend (2010). Basel III – Auswirkungen der Neuregelungen auf die deutsche Kreditwirtschaft, in: Banken Times December 2010 / January 2011, pp. 3-4.

Haasis, Heinrich (2011). Basel-III-Regelungen müssen in USA und Europa in gleicher Weise angewendet werden, Pressemitteilung Nr. 49, May 11, 2011. Retrieved from: http://www.dsgv.de/de/presse/pressemitteilungen/110511_PM_Basel_III_49.pdf, accessed on September 6, 2011.

IMF (2011). Global Financial Stability Report, April 2011. Retrieved from: http://www.imf.org/external/pubs/ft/gfsr/2011/01/pdf/text.pdf, accessed on September 6, 2011.

Reuse, Svend (2011). Corporate Evaluation in Banks – Development of a new Evaluation Model with the Special Focus on the Separation of the Value of Maturity Transformation, in: FAI – Financial Assets and Investing, January 2011, edition 01/2011, Brno, pp. 6-32.

Reuters (2010). Basel III to ease in new bank liquidity rules. Retrieved from: http://www.reuters.com/article/2010/10/19/us-banks-basel-idUSTRE69I1HL20101019, accessed on September 6, 2011.

Schäfer, Jörg (2010). QIS – neue Liquiditätsstandards, Frankfurt 18.02.2011. Retrieved from: http://www.bundesbank.de/download/bankenaufsicht/pdf/qis/liquidity_schaefer.
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