Risk: ECB exposes LCR window-dressing

Liquidity rules are being gamed, the European Central Bank (ECB) has found. The supervisor conducted a specialised stress test that found a number of banks have taken steps to make themselves look good under the lens of the liquidity coverage ratio (LCR) – a key post-crisis gauge of funding risk – by using dubious trades to fluff their liquid asset buffers and borrowing cash in such a way that it doesn’t show up in the calculation.

The full article is available at https://www.risk.net/risk-quantum/7062091/ecb-exposes-lcr-window-dressing

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