As is the case with enhanced capital standards for the largest banking firms, the Basel Committee’s liquidity initiatives are consistent with the Federal Reserve’s obligation under section 165 of the Dodd-Frank Act to impose more stringent liquidity standards on the largest bank holding companies as well as other systemically important nonbank financial firms.
The LCR has been actively reconsidered within the Basel Committee over the last year or so. As this work proceeds, four types of changes appear particularly ripe for consideration. First, the LCR’s definition of high-quality liquid assets should be broadened. In this regard, we support efforts to move away from the current credit risk-based approach and toward a quantitative liquidity-based approach.