A fundamental change for Australia's banking system

smk762 · Dec 16, 2014

https://www.businessspectator.com.a.../fundamental-change-australias-banking-system

The liquidity coverage ratio, part of the Basel III liquidity standard, comes into effect at the beginning of next year... The liquidity coverage ratio requires banks to hold sufficient 'high quality liquid assets' to withstand a 30-day period of stress. The amount of assets held is determined by the composition and maturity structure of each banks' balance sheet. The higher their short-term liabilities, the more HQLA they need to hold.
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Not mentioned in the article, but wouldn't gold bullion be considered a "high quality liquid asset"? Could this change result in a pseudo-return to a partial gold standard?

Caput Lupinum · Dec 16, 2014

LCR: high-quality highly-liquid assets available must exceed the net cash outflows of the next 30 days:
High-quality highly-liquid assets: Level 1 assets: Recognized at 100%: cash, sovereign debt of countries weighted at 0% (which include the PIIGS as they are part of the Eurozone), deposit at central bank. Level 1 assets shall account for at least 60% of the "high-quality highly liquid assets"
Level 2A assets: Recognized at 85% and must not represent more than 40% of the assets: sovereign debt weighted at 20% (countries rated below AA-), corporate bonds and covered bonds rated at least AA-
Level 2B assets (introduced Jan, 2013): non-financial corporate bonds rated between BBB- and A+, with a hair cut of 50%; certain unembumbered equities, with a hair cut of 50%; and certain residential mortgage-backed securities (RMBS), with a hair cut of 25%.
The Level 2B assets will not be eligible for more than 15% of the "high-quality highly liquid assets" and a total level 2 assets will not be eligible for more than 40% of the "high-quality highly liquid assets"
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A fundamental change for Australia's banking system

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A fundamental change for Australia's banking system

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