EU banks could face faster rise in cash buffer

Tim Wallace
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EU BANKS may have to implement new liquidity rules a year earlier than expected as European lawmakers try to push forward the proposals, it emerged yesterday.

Regulators last month decided to delay the liquidity coverage ratio (LCR), phasing it in gradually from 2015 to 2019 on the basis that a cut off date of 2015 would be too sharp and could damage lending to households and businesses.

But the European Parliament wants to it be accelerated and Ireland – EU presidents currently – wants to bring the date forward to 2018, according to documents seen by Bloomberg.

The LCR is a buffer of liquid assets which banks will hold to make sure they can survive a 30-day squeeze on funds.

The idea is to make sure they can rely on their own resources before having to turn to central banks for aid.

But building up this buffer takes away resources which could be used for lending, hurting the economy.

That means there is a balance to be struck, with the MEPs now favouring tighter bank regulation in spite of the fears over lending economic growth.