Masters: Bank regulators reach deal on liquidity

The The Basel Committee on Banking Supervision said on Monday that all but one of the 27 member countries had signed up to the new principles, which limit what banks can count as so-called tier-one capital – the only kind that can be counted on to absorb losses. The lone hold-out, said by people familiar with the situation to be Germany, said it would decide whether to sign on later this year.
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... The real effect will depend on the committee’s next decision, due this autumn, which is to set the minimum required ratio of tier-one capital to risk-weighted assets. The higher the ratio, the bigger the expected impact.

The committee delayed several of its more innovative proposals. For example, the planned “net stable funding ratio”, a first-of-its-kind liquidity rule that requires banks to match the duration of their liabilities and assets more closely, will be in an “observation phase” until at least 2018 and may be modified substantially.

The committee also is taking a deliberate approach in imposing a new leverage ratio designed to prevent banks from using off-balance-sheet vehicles and risk-weighting methods to hide the true size of their balance sheets. The new rule, which would require banks to hold tier-one capital equal to 3 per cent of unweighted assets, will be in a test phase until the end of 2017.