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Basel Committee-endorsed amended liquidity coverage ratio - 08/01/2013


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On 6 January 2013, the Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, endorsed the amendments to the Liquidity Coverage Ratio (LCR) proposed by the Basel Committee, reaffirming the LCR as an essential component of the Basel III reforms.

These amendments are overall favourable for financial institutions and the main changes are summarised below:

  • Gradual increase of the minimum LCR: probably the most important amendment is the phase-in arrangements which align with those that apply to the Basel III capital adequacy requirements: the minimum LCR on 1 January 2015 will be 60%, gradually increased each year by 10 percentage points to reach 100% on 1 January 2019;
  • Expanding the definition of High Quality Liquid Assets (HQLA): a new category of eligible HQLA (Level 2B) has been defined and includes corporate debt securities down to BBB- rating as well as  certain equities and residential mortgage-backed securities (MBS);
  • Adjustment of some run-off rates: several amendments are applied to run-off rates, including the reduction of the outflow rate for “non-operational” deposits provided by non-financial corporates, sovereigns, central banks and PSEs from 75% to 40%; and
  • A number of clarifications to the rules text, such as the operational requirements for HQLA, the definition of operational deposits from wholesale clients or the development of the alternative liquid asset (ALA) treatments.

Do not hesitate to contact us for more details and questions.

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Name:
Marco Lichtfous
Company:
Deloitte Luxembourg
Job Title:
Partner - Capital Markets/Financial Risk
Phone:
+352 45145 4876
Email
mlichtfous@deloitte.lu
Name:
Jean-Philippe Peters
Company:
Deloitte Luxembourg
Job Title:
Partner - Business Risk
Phone:
+352 451 452 276
Email
jppeters@deloitte.lu

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