Basel group proposes rules for liquidity ratio disclosure
Public disclosure improves transparency, reduces uncertainty in the markets says Basel group
The Basel Committee on banking supervision proposed disclosure standards for its so-called liquidity coverage ratio that seek to balance transparency with the need to avoid roiling markets during stress periods.
Public disclosure improves transparency, reduces uncertainty in the markets and strengthens market discipline, the Basel group said in a statement on its website. The measures carefully balanced the benefits of promoting market discipline against the challenges associated with disclosure of liquidity positions under certain circumstances, including the potential for undesirable dynamics during stress periods.
The liquidity coverage ratio is part of an overhaul of global financial rules, known as Basel III, intended to prevent a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. The rule would force banks to hold enough easy-to-sell assets to survive a 30-day credit squeeze.
To promote the benefits of disclosure the committee believes that it is important that banks adopt a common disclosure framework to help market participants consistently assess the liquidity risk position of banks, the group said.
A consultation on the plan runs out on 14 October. Bloomberg
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