LCR

While the markets are still bracing for what the next phase of the global economy will bring, there’s forensic analysis of what Q1’s dislocation implies for funding and liquidity. Jennifer…

ECB Banking Supervision provides temporary capital and operational relief in reaction to coronavirus

March 12, 2020

ECB, LCR, Stress Capital Buffer

Banks can fully use capital and liquidity buffers, including Pillar 2 Guidance Banks will benefit from relief in the composition of capital for Pillar 2 Requirements ECB to consider operational…

Europe’s securitization markets adapt to risk transfer and balance sheet requirements (Premium)

January 22, 2020

Securitization

Basel capital rules, collateral, ESMA, LCR, PCS, SRT, STS, topstory

European Union securitization legislation was supposed to pave the way for a resurgence of the market. We speak with Ian Bell, head of PCS, about the state of the market…

Risk: ECB exposes LCR window-dressing

October 8, 2019

ECB, LCR, risk, 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…

ECB paper: Does liquidity regulation impede the liquidity profile of collateral?

March 28, 2019

collateral, ECB, LCR

Kirsten Schmidt Working Paper Series No 2256 / March 2019 We analyze the pledging behavior of Euro area banks during the introduction of the liquidity coverage ratio (LCR). The LCR…

How the Basel change on settled-to-market will impact balance sheets (Premium)

September 26, 2018

Basel III, Regulatory

Basel Committee, LCR, Leverage Ratio, NSFR, Settled to market, topstory

The Basel Committee has issued a new FAQ on how banks need to treat settled-to-market derivatives transactions in the Liquidity Coverage Ratio and Net Stable Funding Ratio. This will renew…

Basel Committee reduces advantages of “settled-to-market” derivatives

September 21, 2018

BIS, LCR, NSFR, Settled to market

The Basel Committee today issued responses to Frequently Asked Questions (FAQs) related to the treatment of settled-to-market (STM) derivatives under the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio…

Fed’s Quarles on liquidity regulation and size of balance sheet

May 24, 2018

balance sheet policies, Federal Reserve, HQLA, LCR

Excerpts from speech by Randal Quarles, Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System, at the “Currencies, Capital, and Central Bank Balances: A Policy…

A Proposal for Smart Regulation in European SFT Markets

January 25, 2018

Michael Cyrus

Basel III, Collateral Management, Europe, Regulatory, Repo, Securities Lending

Europe, LCR, Leverage Ratio, Michael Cyrus, NSFR, Regulation, SFT, SFTR, topstory

In a post-crisis era, Europeans must focus on efficient and smart regulation in Securities Financing Transactions (SFT) to support competitive financial markets. This can be achieved but requires regulatory attention…

Fed’s Quarles outlines direction of post-crisis regulation

January 20, 2018

Federal Reserve Board of Governors, LCR, Randal Quarles, stress testing

Speech: Early Observations on Improving the Effectiveness of Post-Crisis Regulation by Vice Chairman for Supervision Randal Quarles at the American Bar Association Banking Law Committee Annual Meeting, Washington, D.C. The Federal Reserve…

Success stories this week in securities finance (Premium)

January 18, 2018

Basel III, Dodd-Frank, Europe, Repo, Securities Lending, US

Dodd-Frank, Germany, ICMA, ISLA, LCR, topstory

After what seems like years of difficult news, we would like to publicly recognize situations and groups of people that are moving the collateralized trading markets in the right direction.…

Fed research: how have banks been managing the composition of HQLA?

September 5, 2017

Federal Reserve Board of Governors, HQLA, LCR, research

Leading up to 2014, US banks increased their holdings of high quality liquid assets (HQLA) in part to comply with the liquidity coverage ratio (LCR) requirement. However, once the requirement was met,…

Bank of England’s Sam Woods on regulatory arbitrage and off-balance sheet leverage

July 11, 2017

Bank of England, LCR, Prudential Regulation Authority, regulatory arbitrage

Selected passages from “Looking Both Ways” speech given by Sam Woods, Deputy Governor, Prudential Regulation and CEO, Prudential Regulation Authority “I am especially mindful that financial institutions will always be…

Basel Committee report card on LCR in China, EU, and US

July 5, 2017

Basel Committee, China, EU, LCR, US

Today the Basel Committee on Banking Supervision published reports assessing the implementation of the Liquidity Coverage Ratio (LCR) in China, the European Union and the United States. Overall, the LCR…

EBA sees considerable improvement in the average LCR across EU banks

December 21, 2016

EBA, Europe, LCR

The European Banking Authority (EBA) published today its third impact assessment Report for the liquidity coverage ratio (LCR), together with a review of its phasing-in period. The Report shows a…

Federal Reserve requires disclosure of LCR metrics

December 19, 2016

The Federal Reserve Board on Monday approved a rule requiring for the first time that large banking organizations publicly disclose certain quantitative liquidity risk metrics. The disclosures will provide market…

How much regional disparity is there really in Basel III adoption? (Premium)

November 1, 2016

Asia, Basel III, Europe, US

Basel III, LCR, Leverage Ratio, non-cleared margin, NSFR, SA-CCR, topstory

We talk a lot about how different regions are at different points of adoption for Basel III. It’s easy to point out specific categories like the Leverage Ratio where some…

The Leverage Ratio is working – can regulators relax? (Premium)

September 14, 2016

Basel III, Regulatory

Basel Committee, Basel III, Basel IV, FRTB, LCR, Leverage Ratio, NSFR, topstory

Continuing our pre-game analysis of the Basel Committee’s meeting today and tomorrow, there is new evidence that the Leverage Ratio is working to improve bank capital positions. Could this be…

Fed notes that LCR could seriously disrupt bank lending and policy transmission (Premium)

July 14, 2016

Basel III, Federal Reserve, Repo

Federal Reserve, funding, LCR, lending, Liberty Street Economics, Repo, topstory

In one of those moments where regulators make great policy points but miss a potentially disastrous avalanche up ahead, a new article from the Federal Reserve highlights that the Liquidity…

Federal Reserve finalizes rule adding certain investment grade general obligation state and local municipal bonds to types of assets big banks may hold to meet liquidity needs during time of financial stress

April 1, 2016

The Federal Reserve Board on Friday finalized a rule to include certain U.S. general obligation state and municipal securities in the range of assets large banking organizations may use to…

Bank collateral managers talk transfer pricing and the central collateral funding desk (Premium)

March 17, 2016

Collateral Management, Europe

central collateral funding desk, collateral optimization, Europe, LCR, Leverage Ratio, topstory, Transfer pricing

With collateral being at the heart of regulatory efforts to reduce complexity, banks find themselves needing to change organizational structures. But how internal desks will ultimately end up designed is…

LCR, NSFR, HQLA? The technical reasons for why that FT article was off base

December 8, 2015

Basel III, Collateral Management, Regulatory, Securities Lending

Basel III, Collateral Transformations, Financial Times, HQLA, LCR, NSFR, Securities Lending, topstory

Following the publication of the FT’s article on November 30, “Regulators’ boost for securities lending has risky implications,” and our reply, “The FT suggests that collateral transformations amount to regulatory…

The FT suggests that collateral transformations amount to regulatory arbitrage

December 1, 2015

Basel III, Collateral Management, Regulatory, Securities Lending, Shadow Banking

Collateral Transformations, FT, LCR, Securities Lending, Shadow Banking, topstory

Basel III, Liquidity Management

In a strongly worded article, the Financial Times yesterday came out swinging against collateral transformations. This was a surprise attack against a practice that certainly carries some risk, but is…

Federal Reserve proposes rule on LCR disclosures

November 24, 2015

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…

Mind the gap: building evergreen style portfolios throughout the operational value chain

November 4, 2015

Tobias Duchscherer

evergreen, HQLA, LCR, topstory

Evergreen financing structures are gaining popularity as a way to manage the complexity of Liquidity Coverage Ratio (LCR) funding requirements. However, most trading and post-trade systems are not set up…

Nobody wants your cash

September 22, 2015

Basel III, Cash management

Cash Investment, hedge funds, LCR, NSFR, topstory

We keep on hearing stories about the trouble hedge funds are having in finding a home for their cash. What is going on here? Continue reading

Basel Committee: big banks on track for LCR requirements

September 16, 2015

Basel Committee, LCR, NSFR

Basel III Monitoring Report September 2015 This report presents the results of the Basel Committee’s latest Basel III monitoring exercise. The study is based on the rigorous reporting process set…

Two solutions to the Hot Cash / operational deposits problem (Premium Content)

September 9, 2015

Basel III, Cash management, Hedge Funds, Investments, Liquidity Management, Prime Brokerage, Repo, Systemic Risk

Basel III, Citi, Hot Cash, LCR, short-term cash, SPVs, structured notes, topstory, UBS

The problem of prime brokers and custodians holding hedge fund cash and other operational deposits is becoming acute. We are now seeing two sets of solutions emerge to solve this…

Measuring the impact of LCR and other liquidity regulation on banks – a new study by the Bank of England

July 27, 2015

Bank of England, Liquidity Management, Repo

Bank of England, banks, Individual Liquidity Guidance, LCR, Liquidity, topstory

The Bank of England has released a first-of-its-kind study on the empirical impact of liquidity regulations (LCR, and in the UK, Individual Liquidity Guidance or ILG) on bank activities. In…

US Office of Financial Research takes a closer look at funding shocks

July 23, 2015

Basel III, Dodd-Frank, Regulatory, Repo, Systemic Risk

fire sale risk, fire sales, HQLA, LCR, NSFR, Office of Financial Research, OFR, topstory

The US Office of Financial Research (OFR) published on July 22nd an interesting paper “Incorporating Liquidity Shocks and Feedbacks in Bank Stress Tests”, written by Jill Cetina. There is something…

BCBS, IOSCO and IAIS release joint report on risk management. They address collateral shortages and illiquid margin.

June 4, 2015

Basel Committee on Banking Supervision, BCBS, IAIS, International Associate of Insurance Supervisors, International Organization of Securities Commissioners, IOSCO, LCR, topstory

CCP, Collateral Management, Derivatives, Market infrastructure, Regulatory, Repo

The Joint Forum, consisting of the Basel Committee on Banking Supervision (BCBS), International Organization of Securities Commissioners (IOSCO), and the International Associate of Insurance Supervisors (IAIS) released on June 2nd…

The Fed releases proposed rules on using Muni bonds for LCR requirements. But the devil is in the details.

May 28, 2015

Dodd-Frank, Federal Reserve, Tri-Party Repo

HQLA, LCR, Level 2B assets, topstory

The Federal Reserve released on May 18th “Liquidity Coverage Ratio: Treatment of U.S. Municipal Securities as High-Quality Liquid Assets, a Notice of Proposed Rulemaking with Request for Public Comment”. General…

Who will close the gap between short-term securities loans and the LCR? (Premium Content)

April 29, 2015

Basel III, CCP, Securities Lending, Shadow Banking, Single Treasury Futures

Basel III, Collateral Transformations, Collateral upgrades, LCR, NSFR, Securities Lending, topstory

We’re seeing a hole in the market, one that we thought would be solved already but that remains an attractive opportunity for an institution able to take on some maturity…

Widespread media coverage of end of quarter UST repo rate hikes, but this is the new normal

April 2, 2015

Basel III, Federal Reserve, Repo, RRP, US

DTCC, Federal Reserve, GCF, ICAP, LCR, Leverage Ratio, Repo, Reverse Repo Facility, topstory

Pretty much all the big media outlets covered US Treasury repo spikes at the end of the quarter. The data from DTCC’s GCF repo tell the story well for intra-broker…

Managing LCR turns out to be hard for banks

March 26, 2015

Basel III, Big Data, Collateral Management, Regulatory

HQLA, LCR, RMBS, topstory

Earlier this month there was an interesting article in Bloomberg Briefs “Leveling High-Quality Liquid Assets Under Basel III Proves Difficult for Banks” by Cady North and Matthew Debrabant. It turns…

A new LCR-compliant basket for European repo trading

March 2, 2015

Tobias Duchscherer

Basel III, Collateral Management, ECB, Europe, Repo

Basel III, ECB, Eurex repo, LCR, Repo, topstory

The European repo market is seeing the emergence of an LCR-compliant trading basket that takes the work out of conducting credit analysis on individual bonds, especially in light of national…

Debevoise & Plimpton publishes a guide to NSFR — providing some clarity to a confusing topic

January 6, 2015

Basel III, Liquidity Management, Market infrastructure, Primary Dealers, Prime Brokerage, Regulatory, Repo, Securities Lending

ASF, Available Stable Funding, Debevoise & Plimpton, LCR, Net Stable Funding Ratio, NSFR, Required Stable Funding, RSF, topstory

Last month Debevoise & Plimpton published a nice guide to the Net Stable Funding Ratio (NSFR), “Client Update Basel Committee Adopts Net Stable Funding Ratio: How Much Liquidity Is Enough?”.…

Part II: The Fed releases rules on capital for GSIBs, includes extra requirements for securities financing trades

This is part II of our post on the Fed’s new capital rules. We look at the calculation methodology and some observations about the rules. Continue reading

Part I: The Fed releases rules on capital for GSIBs, includes extra requirements for securities financing trades

The Fed has released the latest capital rules for Global Systemically Important Bank Holding Companies (GSIBs). One critical part of this set of rules is the inclusion of a second…

Corporates: how to invest their cash? Is non-intermediated access to centrally cleared tri-party repo coming?

November 11, 2014

Basel III, CCP, Collateral Management, Europe, Repo, Tri-Party Repo

Central Counterparties, Clearstream, Eurex repo, GC Pooling, GC Pooling Select, LCR, topstory, Treasury Peer, tri-party pooling, Wall Street Journal

Two articles on how corporates invest their cash caught our attention. Both were published on November 3, 2014. The first is from the Wall Street Journal “New Rules, New Corporate…

European Commission accepts ABS as a Level 2B asset

October 13, 2014

ABS, European Commission, LCR

Recognising the good liquidity performance of certain securitisations and to ensure consistency across financial sectors, the Commission has made some securitisation instruments eligible as level 2b assets for credit institutions’…

What should be part of the LCR buffer: risk managers say no to covered bonds

October 2, 2014

Basel III, Europe, Liquidity Management, Regulatory

LCR, topstory

An article in Risk by Lukas Becker, dated Oct. 1st “Banks avoiding covered bonds for LCR buffer over liquidity fears” caught our attention. For those not familiar with covered bonds – they are…

Updates to the LCR rules: some winners, some losers

September 11, 2014

Basel III, Federal Reserve, Regulatory, Repo

HQLA, LCR, Mayra Rodríguez Valladares, public sector entities, Sullivan & Cromwell

The latest incarnation of the Liquidity Coverage Ratio (LCR) rules were released. “Liquidity Coverage Ratio: Liquidity Risk Measurement Standards” clocks in at 399 pages – there is a lot minutiae…

WSJ writes about increase in bank UST positions being a Volcker Rule dodge. We wonder if it might be about LCR compliance?

July 28, 2014

Basel III, Regulatory, Repo

LCR

A July 21st article in the Wall Street Journal “The Volcker Risk Bubble” by John Carney described a study by economists Jussi Keppoy and Josef Kortez about how banks are taking…

The NY Fed on funding of risky assets in tri-party: WAMs have moved longer

June 16, 2014

Basel III, Federal Reserve, Tri-Party Repo

LCR, risk assets

Last week there was an interesting post in the New York Fed’s Liberty Street Economics blog. Entitled “What’s Your WAM? Taking Stock of Dealers’ Funding Durability” by Adam Copeland, Isaac…

WSJ article on leveraging CLOs — haven't we seen this movie before?

May 7, 2014

Corporate Bonds, Credit Exposure, Hedge Funds, Investments, Repo

CLO, Katy Burne, LCR, NSFR, RMBS, Wall Street Journal

A May 5th Wall Street Journal article, “Banks Revive Role in Complex Debt, Lenders Had Eschewed Loan-Bond Leverage Since Crisis, but New Rules Spur Them to Seek Buyers” by Katy…

Highlights from comment letters on the Net Stable Funding Ratio (Finadium subscribers only)

April 30, 2014

Basel III, Regulatory

Basel Committee, LCR, NSFR

The Basel Committee on Banking Supervision has released 48 comment letters in response to its consultative document, “Basel III: the Net Stable Funding Ratio,” published January 12, 2014. These letters…

Hedge funds not getting much love from LCR or NSFR

April 23, 2014

Basel III, Cash management

LCR, NSFR

Can hedge funds get a break? It looks like they are not getting much love from LCR or NSFR.Continue reading

What will be the gating factor in sec finance, the LCR or the Leverage Ratio?

November 13, 2013

Basel III, Federal Reserve, Regulatory, Repo

Capital Charges, Federal Reserve, Jeremy Stein, LCR, Leverage Ratio, Repo SFTs

This conversation keeps coming back around and we’re not yet satisfied with the conclusions that we are hearing. Most recently, Fed Governor Jeremy Stein brought it up again. The tricky…

A look at the impact of a Government default on collateral markets

November 5, 2013

CCP, CFTC, Cleared Interest Rate Swaps, Collateral Management, Derivatives, Federal Reserve

default, LCR, US Treasuries