Therefore, SSBs have focused closely on improving the liquidity risk profile of the individual firms. But even these regulations have not been without their share of unintended consequences of varying degree across jurisdictions. On a broader level, in order to meet the LCR norms, the banks would need to hold more long terms liabilities and short term assets.
Also, the NSFR norms would lead to curtailment of the market making abilities of the banks. Both of these would have adverse implications for the banks’ margins. In India, the banks are statutorily required to hold a certain percentage of their liabilities (SLR) in Government securities, State Government securities and other approved securities.