EBA’s Banking Stakeholder Group has published a position paper on the new bank liquidity rules to be introduced in the Capital Requirements Regulation (CRR). The report looks at the Net Stable Funding Requirement and the Liquidity Coverage Ratio (LCR). It then focuses on the expected impact and scope for calibration of the LCR, as it will be implemented first. The definition of eligible liquid assets for the purposes of building up the liquidity buffer must be wide enough to promote investment in sovereign debt, corporate bonds and asset-backed securities. The paper also discusses the assumptions underpinning the calculation of potential cash outflows during the distressed scenario against which the LCR is to act as backstop. It warns that changes in these assumptions may cause shifts of funds across business lines and have undesirable consequences. (Source: New Bank Liquidity Rules: Dangers Ahead)