The Interplay Between Liquidity Regulation, Monetary Policy Implementation and Financial Stability

Todd Keister

Chapter 13 in Achieving Financial Stability:Challenges to Prudential Regulation, 2017, pp 173-193 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The new international regulatory framework for banks known as Basel III updates existing standards for capital requirements while introducing new standards for regulating and evaluating banks’ leverage and liquidity. In this chapter, I discuss some potential unintended consequences of the new liquidity standards, focusing on the Liquidity Coverage Ratio (LCR). The LCR aims to encourage banks to hold a more liquid portfolio of assets and to limit their reliance on very short-term liabilities. Specifically, it requires each subject bank to hold enough high-quality liquid assets that it could survive a 30-day period of stressed financial conditions — including a partial run by its depositors and other short-term creditors — without having to sell illiquid assets and thereby contribute to fire-sale conditions…

Keywords: Money and Banking; International Banking; Financial Instititions; Banks; Regulations; Compliance; Financial Crisis; Great Financial Crisis 2008; Microprudential; Macroprudential; Financial Stability (search for similar items in EconPapers)
JEL-codes: E50 (search for similar items in EconPapers)
Date: 2017
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Journal Article: The interplay between liquidity regulation, monetary policy implementation and financial stability (2019)
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