While generally supportive of the LCR, the letter argues that prior to finalizing the rule the agencies should take more time to consider the implications of the rule for the U.S. banking industry and financial markets, adjust the ratio as needed and provide an additional notice and comment period. Among other things, Keating notes the problems with the narrow band of eligible high-quality liquid assets and the lack of correlation of the proposed run-off rates with historical bank counterparty behavior. Keating wrote:
We support strong and effective liquidity regulation. It is precisely for that reason that we believe that the agencies need to be sure that the standards meet the realities of U.S. banks and the financial markets. A bad fit could in fact undermine liquidity and the resilience of our system.
Read the letter.