[2] But first, let's review why we needed the CLF in the first place. Why Do We Need a CLF? The global financial crisis highlighted how important it is for banks to manage their liquidity risk. During the crisis, many banks overseas faced significant liquidity problems having not paid enough attention to their liquidity management in the lead up to the crisis.
Following this experience, the Basel Committee on Banking Supervision proposed tougher liquidity requirements as part of its broader package of reforms, known as the Basel III regulations. These changes have made the banking system more resilient to periods of financial market stress.