WASHINGTON Regulators next week plan to finalize a tough new liquidity measure as well as propose margin requirements for banks engaged in swaps activities.
The Federal Reserve Board will hold an open meeting Wednesday to consider a final rule instituting the "liquidity coverage ratio" for banks with over $50 billion in assets. The Fed proposed the new liquidity requirement in October along with the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency. The proposal would set new standards for the types of high-quality liquid assets banks must hold to cover net cash outflows over a 30-day period.
The regulators' proposal a more stringent version of the LCR plan than that put forward by the international Basel Committee would limit the types of liquid assets not subject to haircuts to reserves held at the Fed or a foreign central bank, U.S. Treasuries, other securities issued or guaranteed by the U.S. government and certain types of sovereign debt. A bank could use other types of assets to fulfill the liquidity requirement, such as securities backed by the government-sponsored enterprises, but those would be subject to haircuts and could only make up a portion of the institution's high quality liquid assets.
In addition to the LCR, the Fed board will also consider a proposal establishing margin requirements for non-cleared swaps of regulated institutions. The Fed and other bank regulators had originally proposed margin requirements in 2011 to implement a provision of the Dodd-Frank Act. But they later reopened the comment period on the proposal after the Basel Committee had released a document in 2012 proposing international margin standards for non-centrally cleared derivatives. The Basel framework was finalized last year.