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Wednesday, September 3, 2014

ABA: Additional Time Needed to Consider LCR Impact

In a recent letter to the Federal Reserve, FDIC and OCC, ABA noted that the Agencies needed additional time to consider the LCR’s impact on not only the institutions envisioned in the Basel negotiations, but also on the broader economy and U.S. financial markets. ABA is concerned that what qualifies as a “high-quality liquid asset” may be too narrowly defined and create a shortage that could provoke panic. In response to the Agencies’s rule released today, ABA president and CEO Frank Keating stated:
We appreciate that regulators recognized the rule’s complexity by providing additional time for institutions to comply with the daily calculation, and expanding the definition of high-quality liquid assets to include certain corporate debt and equity. We also appreciate that regulators are better tailoring the rule so it applies more flexibly to mid-sized institutions.
However, Keating noted that the rule has “significant flaws with the potential for adverse and unintended consequences.”

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