February 11, 2014

The U.S. Federal Banking Agencies to Require Large Banks to Maintain a Liquidity Coverage Ratio

Arnold & Porter Advisory

The U.S. federal banking agencies have issued a proposal to require banking firms with at least US$50 billion in total consolidated assets to maintain a 100% liquidity coverage ratio (LCR). The proposed rule is intended to be consistent with the LCR standard that the Basel Committee on Banking Supervision has established for large, global banks as part of the Basel III liquidity framework. But one obvious deviation is that the U.S. proposal would apply a modified LCR requirement to some firms that are not internationally active. Although U.S. bank regulators previously have addressed liquidity in examination ratings and reserve requirements, and as a prudential matter on an ad hoc basis, the LCR rule would be the first quantitative liquidity requirement formally included in U.S. banking regulations.

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