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Basel liquidity regulation: was it improved with the 2013 revisions?

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  • Michal Kowalik

Abstract

The Basel III Accord of December 2010, aiming to reduce the chances of systemic financial crises, included provisions regulating the liquid assets held by financial institutions. The Accord included provisions requiring financial institutions to maintain liquidity buffers: stocks of liquid assets sufficient to cover 30 days of cash outflow in a financial \\"stress event.\\" ; The Accord was revised in January 2013, with new provisions regarding the size, composition and availability of liquidity buffers. ; Kowalik finds that while the revised liquidity provisions of 2013 improved on the original 2010 provisions, there still are important shortcomings. Rules governing the availability of the required liquidity buffers were improved. But the new provisions, like the original ones, still determine liquidity buffer size and composition without taking into account the nature of an individual financial institution's risk profile, capital, and business activity.

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  • Michal Kowalik, 2013. "Basel liquidity regulation: was it improved with the 2013 revisions?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 65-87.
    • Handle: RePEc:fip:fedker:y:2013:i:qii:n:v.98no.2:x:2
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    Cited by:

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    2. Boyer, Pierre C. & Kempf, Hubert, 2020. "Regulatory arbitrage and the efficiency of banking regulation," Journal of Financial Intermediation, Elsevier, vol. 41(C).
    3. Fabrice Tourre, 2016. "Debt Runs and the Value of Liquidity Reserves," 2016 Meeting Papers 709, Society for Economic Dynamics.
    4. Davis, Douglas D. & Korenok, Oleg & Lightle, John P. & Prescott, Edward S., 2020. "Liquidity requirements and the interbank loan market: An experimental investigation," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 113-126.
    5. Li, Boyao & Xiong, Wanting & Chen, Liujun & Wang, Yougui, 2017. "The impact of the liquidity coverage ratio on money creation: A stock-flow based dynamic approach," Economic Modelling, Elsevier, vol. 67(C), pages 193-202.
    6. Tafirei Mashamba & Farai Kwenda, 2017. "A Look at the Liquidity Management Practices of Banks in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 9(3), pages 113-120.
    7. Eva Liebmann & Joe Peek, 2015. "Global standards for liquidity regulation," Current Policy Perspectives 15-3, Federal Reserve Bank of Boston.

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