The Basel Committee has proposed testing a minimum Tier 1 leverage ratio of 3% (33.33 times) to start with as a Pillar 2 measure which will eventually be made a Pillar 1 requirement. International liquidity framework Despite liquidity being central to the functioning of financial markets in general and banks in particular, liquidity regulation did not receive adequate attention until recently.
There were no internationally agreed and harmonized liquidity standards. The regulation of banking sector during the past two decades largely revolved around Basel I and Basel II capital regulations. Nor were there any international standards to limit excessive maturity mismatch resulting in increasing proportions of long-dated assets being financed by short-term borrowings.