Federal Banking Agencies Adopt Final Liquidity Coverage Ratio Regulations
The federal banking agencies recently approved a final rule that establishes, for the first time, a quantitative minimum liquidity coverage ratio for large, internationally active banking organizations, as well as a modified, less stringent liquidity coverage ratio for depository institution holding companies that are not internationally active, but have at least $50 billion in total consolidated assets. By requiring banking organizations to hold a stock of high quality liquid assets sufficient to survive a sustained acute liquidity stress scenario, the final rule aims to avoid the liquidity squeeze and subsequent deterioration of financial markets experienced during the 2007-2008 financial crisis.