The Basel committee also eased its recommended stress scenarios in many instances. For instance it reduced the outflow stress levels on certain fully insured retail deposits, non-financial corporate deposits, and committed liquidity facilities to non-financials.
Instead of needing a 100% LCR by 2015, banks now are expected to have just a 60% ratio by then. The remainder would increase incrementally until 2019, when banks would have to be fully compliant. It is important to remember, however, that the Basel Committee has no legislative or enforcement powers anywhere. Hence, it is quite likely that any jurisdiction could water down the LCR or delay it further depending on its views and needs.
One summer in Moscow, as an undergraduate majoring in Russian and Soviet studies, I learned a quintessentially Soviet joke: "we pretend to work and they pretend to pay us." Similarly, in today's financial world, regulators pretend to supervise while banks pretend to be liquid.
Mayra Rodríguez Valladares is a managing principal at MRV Associates, a New York based capital markets and financial regulatory consulting and training firm. She also teaches at New York Institute of Finance. She can be reached by email at MRV@Post.Harvard.Edu or Twitter: @MRVAssociates.