Regulators to Banks: You Need to Hold Less Money
Basel Committee eases rules on liquid holdings
By Neal Colgrass, Newser Staff
Posted Jan 6, 2013 2:05 PM CST
ICICI customers stand in a queue to withdraw money outside an ICICI ATM after rumors of the bank being in financial crises, in Hyderabad, India, late Monday, Sept. 29, 2008.   (AP Photo/Mahesh Kumar A.)

(Newser) – Banks around the world breathed a sigh of relief today when regulators agreed to ease rules on liquid holdings, Bloomberg reports. Facing a barrage of criticism, the Basel Committee on Banking Supervision agreed to let banks hold less cash—at least for now—and a greater variety of liquid assets than a rule had previously allowed. Analysts say the update will ease interbank lending and make banks less vulnerable to runs.

"This was a compromise between competing views from around the world," said Bank of England Governor Mervyn King. "For the first time in regulatory history we have a truly global minimum standard for bank liquidity." The deal allows banks to hold only 60% of their required liquidity by 2015 and the rest by 2019; tests in 2011 found that 209 banks were $2.3 trillion short of assets they were supposed to hold. Banks warned that Basel's original 2010 rule would force them to buy more sovereign debt and tether their fate to governments' solvency.

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Showing 3 of 3 comments
Comp_User
Jan 6, 2013 11:02 PM CST
As we get deeper into the upcoming recession and there is a couple of runs on a few smaller banks the banks will try to liquidate the treasury notes they hold and the world will find out the US can't print money fast enough to pay off the $16,000,000,000,000.00 they owe and it will no longer be the base currency. When it was backed by gold it had a value, now that its backed by BS, well you know what its worth.
DougMasters
Jan 6, 2013 6:57 PM CST
Someone very smart once was against bank notes.
JoeQ
Jan 6, 2013 2:43 PM CST
"Banks warned that Basel's original 2010 rule would force them to buy more sovereign debt and tether their fate to governments' solvency". Translation: World banks don't want to buy more treasury bills because they are losing faith that certain countries will repay their debts.