Three federal agencies, including the Federal Reserve Bank, approved a standardized minimum liquidity requirement for large and internationally active banking organizations.
The goal of the requirement is to improve the resiliency of these significant banking organizations during times of financial and economic stress.
In general, such organizations must maintain an amount of unencumbered high-quality liquid assets that is not less than 100% of their projected total net cash outflows over a potential 30-day stress period. This requirement is generally consistent with the liquidity requirement instituted by the Basel Committee on Banking Supervision.
The other two agencies participating in this rulemaking were the Office of the Comptroller of the Currency, Department of the Treasury and the Federal Deposit Insurance Corporation.
The effective date of the rule is January 1, 2015, with a phase-in of requirements over two years.
Separately, the same three federal agencies finalized a rule related to certain banking organizations’ so-called “supplemental leverage ratio” in connection with the calculation of their risk-based capital requirements. This calculation endeavors “more appropriately [to capture] a banking organization’s on- and off-balance sheet exposures.”
Beginning in 2015 such organizations must disclose this ratio, and starting in 2018 they must maintain a minimum supplemental leverage ratio capital requirement of 3%.
(Click here to access further information on the new liquidity coverage ratio requirement and here for more information on the supplemental leverage ratio requirement in two articles appearing in the Corporate and Financial Weekly Digest edition of September 5 by Katten Muchin Rosenman LLP.)