Journal Article

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


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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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 2013

Issue: Q II

Pages: 65-87