Were a liquidity stress to arise, particularly one following an asset price shock that broadly affected financial intermediaries, the result could be the kind of freezing up of financial system gears that took place a few years ago, with consequences for the broader economy that went well beyond the effects on specific markets or institutions.
Basel III sets down the minimum standards. However, rules alone, no matter how well written and how consistently implemented, will not be enough to maintain the financial health and stability of the banking system. Poor risk management, interlinkages and common exposures can still give shocks to the financial system.