In respect of liquidity, the Basel Committee proposed in December 2010 two new standards: the liquidity coverage ratio (LCR), which aims to ensure that banks hold sufficient high-quality liquid assets to withstand an acute stress scenario lasting one month; and the net stable funding ratio (NSFR), which aims to address banks’ longer-term structural liquidity mismatches by requiring a minimum amount of stable funding (based on the liquidity characteristics of banks’ assets) over a one-year period.
It is important that the regulation does not hamper the functioning of funding markets. This applies in particular to the calibration of the run-off rates for interbank funding and to the asymmetrical treatment of liquidity facilities extended to financial firms.