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Regulators unveiled a proposal Thursday that would institute tough new liquidity requirements on U.S. financial institutions, acknowledging that their plan is harsher than a global framework suggested by international supervisors.
October 24 -
Regulators are nearing completion of a landmark proposal that would institute a liquidity requirement for financial institutions designed to help buffer against a prolonged market crisis.
October 17
WASHINGTON The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency on Wednesday officially signed off on a joint proposal with the Federal Reserve Board that would implement new liquidity risk standards for large banks.
The proposal, which would become effective starting in 2015, would require large institutions to hold a sufficient amount of high-quality, liquid assets - including central bank reserves, government-backed securities and corporate debt - that could quickly be converted into cash during a crisis. Institutions would have to be fully compliant with the rule by January 2017.
An institution subject to the proposal would have to hold enough such high-quality assets on a given business day to be equal or greater than projected cash outflows, minus projected inflows, over a 30-day period. The requirement, which is a more stringent version of a standard imposed by the international Basel Committee, would apply to banking companies with over $250 billion in assets and those with over $10 billion in foreign exposures, as well as their bank subsidiaries with over $10 billion in assets.
The Fed approved a nearly identical version of the proposal on Oct. 24, which also imposed a modified version of the rule on holding companies with at least $50 billion in assets.
"The proposed liquidity rule will help ensure that a bank's cash, and not taxpayer money, is the first line of defense if it faces a short-term funding stress," Comptroller Thomas Curry said in a press release.
