Recent Studies Reinforce the Case for the Liquidity Coverage Ratio

Drawing mainly on the recent European Banking Authority’s (EBA) impact assessment, this white paper by Stefan W Schmitz, head of the macro-prudential supervision unit at the Austrian Central Bank, and Heiko Hesse, economist in the monetary and capital markets department of the International Monetary Fund (IMF), examines the implementation of the Liquidity Coverage Ratio (LCR) in the EU, which is due by 31 December 2014. The recalibration of the LCR in January 2013 watered down the standard significantly. Nevertheless, banks in the EU still feature substantial liquidity risk exposure.

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