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that banks can improve asset liquidity. Securities are normally more liquid than loans and other assets, although some large loans are now designed to be relatively easy to
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The recent turmoil revealed certain weaknesses in these practices that are now being addressed by supervisors globally. Central banks—as the ultimate source of liquidity—are taking an enhanced interest in liquidity risk. The recent events have highlighted the central bank as “key stakeholder” in this area.
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Jul 12, 2019 · In particular, beginning in 2015, large banks in the United States have needed to comply with the liquidity coverage ratio (LCR) by holding sufficient "high-quality liquid assets" (HQLA), a requirement that has induced significant changes to banks' balance sheet management. In this article, we examine how U.S. banks have managed the composition ...
HQLA (except Level 2B assets as defined below) should ideally be eligible at central banks Footnote 7 for intraday liquidity needs and overnight liquidity facilities. In the past, central banks have provided a further backstop to the supply of banking system liquidity under conditions of severe stress.
Our assessment shows that the Canadian banking sector created liquidity steadily from 2012 to 2015, stabilizing in 2016 through the second quarter of 2019. Over this period, liquidity creation was mainly driven by two sets of movements on banks’ balance sheets: decreases in illiquid liabilities and increases in liquid liabilities such as bank ...
- Annika Gnann, Sahika Kaya
- 2019
The liquidity requirements set by the Basel Committee are likely to prove an even bigger challenge than those on capital. For many banks, these requirements are ‘the iceberg below the water’. Until recently, the main focus had been on the challenges posed by capital requirements, but these additional standards will necessitate operational ...
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view of liquidity where banks have a target portfolio composition resulting from balancing the costs and benefits of the various liquid assets, and a “pecking order” view where banks rely on a single liquid asset to finance reserves holdings. Using counterfactual simulations, we find support for the “trade-off” view of liquidity.
