Analysis

U.S. regulatory capital

Basel III liquidity coverage ratio final rule

The U.S. Basel III liquidity coverage ratio (LCR) rule is finalized. Learn how this ruling impacts your financial institution.

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​The U.S. LCR rule is finalized and requires banks to maintain minimum amounts of liquid assets to withstand cash outflows over a 30-day horizon, calculated as per prescribed methodology. Read on for highlights from Deloitte’s analysis of the rule, or download the report for observations, impacts, and a more extensive review.

Scope and applicability

Applicability is based on the asset size, type of the institution, and activities.

  • LCR applies to the largest internationally active banks, while large banks are subject to a less stringent LCR requirement (modified LCR)
  • Nonbank systemically important financial institutions (SIFIs), and foreign banking organizations (FBOs) with assets >$50 billion are exempted, and will be addressed through separate future rulemaking

Implementation and reporting timelines

Transition period remains same, however relief provided around calculation frequency.

  • LCR: Transition period remains 2015 to 2017, but postpones daily reporting requirement
  • Modified LCR: Postpones effective date to 2016 and removes daily reporting requirement
  • LCR with accelerated timelines: Imposes an accelerated timeline for daily reporting

Ratio calculation overview

Calculation utilizes a supervisory-defined methodology with prescribed factors and rates that takes into account a 30-day stress scenario combining idiosyncratic and market-wide shocks.

  • Modified approach for calculating maturity mismatch
  • Expansion of eligible HQLAs
  • Adjustments to certain outflow/inflow rates, etc.

However, U.S. final rule remains more stringent in certain areas than BCBS international guidance

Shorter transition timeline (2017 instead of 2019)

  • Maturity mismatch add-on calculation
  • Certain assets (cash, municipal bonds, central bank restricted committed facilities, covered bonds, etc.) considered ineligible as HQLA
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