EBA to Rank Most-Liquid Securities for Hitting Basel Goal

Europe’s top banking regulator will start ranking financial assets in order of liquidity as it implements international rules to protect banks from a sudden loss of short-term funding.

The European Banking Authority will create a “scorecard” of asset liquidity, the agency said in an e-mailed statement, as part of requirements that banks hold a buffer of assets, known as the Liquidity Coverage Ratio, they can quickly sell to survive a 30-day credit squeeze.

The EBA’s analysis will also “identify the features that are of particular importance to market liquidity” and report to the European Union’s executive body, the regulator said.

Central bankers from around the world, who make up the Basel Committee on Banking Supervision, agreed on Jan. 6 to give banks more time and the right to use more types of securities to meet the liquidity ratio. The LCR is part of an overhaul of global financial rules, known as Basel III, intended to prevent a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc.

Ireland, which holds the rotating presidency of the EU, is pressing for an agreement to have the rule take full effect on Jan. 1, 2018, a year ahead of a deadline set last month by the global central bank chiefs. Global regulators had previously planned to implement the requirement fully from 2015.

To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Christopher Scinta in London at cscinta@bloomberg.net

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