Basel III to loosen its liquidity rules

BANKS will be allowed to run down their reserves of liquid assets below the minimum “during a period of stress”, the committee in charge of setting the Basel III rules has decided.

In an update last night, the Basel Committee said that it would provide specific criteria for when and how banks would be allowed to do so.

It said that in a crisis, “banks would be expected to use their pool of liquid assets, thereby temporarily falling below the minimum requirement”. There is a fierce debate among UK regulators as to whether banks should be allowed to run down their capital and liquidity reserves.

And in a move that will be welcomed by lenders, the committee hinted that it could let a wider range of assets count towards the requirement, “addressing specific concerns regarding the pool of high-quality liquid assets”.