Basel III liquidity standard and strategy for assessing implementation of standards endorsed by Group of Governors and Heads of Supervision

08 January 2012

The Group of Governors and Heads of Supervision (GHOS) met on 8 January 2012. The main items of discussion were the Basel Committee's proposals on the Liquidity Coverage Ratio (LCR) and its strategy for assessing implementation of the Basel regulatory framework more broadly.

The Committee will monitor, on an ongoing basis, the status of members' adoption of the globally-agreed Basel rules. It will review the compliance of members' domestic rules or regulations with the international minimum standards in order to identify differences that could raise prudential or level playing field concerns. The Committee will also review the measurement of risk-weighted assets to ensure consistency in practice across banks and jurisdictions.


Against this background, each Basel Committee member country has committed to undergo a detailed peer review of its implementation of all components of the Basel regulatory framework. In addition to Basel III, the Committee will assess implementation of Basel II and Basel II.5 (i.e. the July 2009 enhancements on market risk and resecuritisations). The GHOS also endorsed the Committee's agreement to publish the results of the assessments. The Basel Committee will discuss and define the protocol governing the publication of the results. The GHOS also agreed that the initial peer reviews should assess implementation in the European Union, Japan and the United States. These reviews will commence in the first quarter of 2012.


With respect to the Liquidity Coverage Ratio, GHOS members reiterated the central principle that a bank is expected to have a stable funding structure and a stock of high-quality liquid assets that should be available to meet its liquidity needs in times of stress. Once the LCR has been implemented, its 100 per cent threshold will be a minimum requirement in normal times. But during a period of stress, banks would be expected to use their pool of liquid assets, thereby temporarily falling below the minimum requirement. The GHOS also reaffirmed its commitment to introduce the LCR as a minimum standard in 2015.

Press release


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