In a Q&A following a speech at the Institute of International Bankers last week, the Federal Reserve’s Randal Quarles said that Basel III work is now back on at the Fed.
He said that NSFR, with a proposal out since 2016, doesn’t need to be viewed as the final Basel package. The Basel package should be capital neutral for the industry in aggregate but will have different consequences for different firms.
The calibration of the NSFR remains uncertain, and the Fed will try to address liquidity concerns while getting the benefits of the measure. He notes that the Fed would like to live up to its agreement on Basel III. Other central banks and regulators have pointed out the Fed’s variances with displeasure.
Quarles expects that NSFR will move to a final rule in the next iteration rather than publish a new draft for discussion.