A worst-case scenario related to the Basel III accords did not materialize, as newly announced global liquidity standards have turned out to be less burdensome than initially feared. Even better, their implementation has been delayed until 2019.
The Financial Times reports that members of the Basel Committee on Banking Supervision approved a final rule that is less strict than a draft version written more than two years ago. Under the rule, banks will be able to employ a greater variety of liquid assets toward their buffers, including high-quality mortgage-backed securities.
In the initial draft version of the rule, only government bonds and top-quality corporate bonds were to be counted toward the buffers. However, the global financial services industry lobbied to soften this draft, arguing that it would hinder their ability to provide credit.
Sir Mervyn King, who chairs the Basel committee's oversight, called the agreement ‘a very significant achievement [and] a clear commitment to ensure that banks hold sufficient liquid assets to prevent central banks from becoming lenders of first resort.’