Federal Reserve proposes rule on LCR disclosures

The Federal Reserve Board on Tuesday proposed a rule requiring large banking organizations to publicly disclose several measures of their liquidity profile. These measures will be the first required public disclosure of a quantitative liquidity risk metric for large banking organizations.

Under the Liquidity Coverage Ratio (LCR) rule adopted by the federal banking agencies last September, large banking organizations (with consolidated assets of $50 billion or more) and certain depository institution subsidiaries are required to hold a minimum amount of high-quality liquid assets (HQLA) that can be easily and quickly converted into cash. The amount of HQLA held by each large banking organization must be equal to or greater than its projected net cash outflow during a hypothetical stress scenario lasting for 30 days. The ratio of the firm’s HQLA to its net cash outflow is its LCR.

Under the proposed rule, large banking organizations would be required to disclose their consolidated LCRs each quarter based on averages over the prior quarter. Firms would also be required to disclose their consolidated HQLA amounts, broken down by HQLA category. Additionally, firms would be required to disclose their projected net cash outflow amounts, including retail inflows and outflows, derivatives inflows and outflows, and several other measures.

Comments on the proposal will be accepted through February 2, 2016.

A PDF of the proposal can be found here.

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