The FDIC and OCC formally proposed a rule implementing the Liquidity Coverage Ratio—one of two Basel III liquidity standards—that would require banks to hold highly liquid assets relative to cash outflows over a 30-day period during a stressed scenario. The Federal Reserve issued the proposal for comment last week.
The LCR would generally apply to banking organizations with over $50 billion in assets. Internationally active banking organizations with over $250 billion in assets and certain subsidiaries would have to hold high-quality liquid assets against the largest “net cumulative cash outflow as of the end of the 30-day period.”
The proposal would phase in the new requirements over time, with an 80% LCR required in 2015, 90% in 2016 and the full LCR in 2017. It also includes detailed guidance on calculating high-quality liquid assets and total net cash outflow, as well as describing how bank supervisors will respond to an LCR shortfall.
Read the agencies' press release.