Morgan Stanley Tops Peers With 125% Basel Liquidity RatioMichael J. Moore
Morgan Stanley, which borrowed the most from the Federal Reserve in the 2008 financial crisis, now has one of the highest liquidity-reserve levels among the biggest banks to defend against another funding freeze.
Morgan Stanley estimates its liquidity coverage ratio is more than 125 percent, based on the New York-based company’s interpretation of rules set to take effect in 2015, Treasurer David Russo said today on a conference call with fixed-income investors. That tops Citigroup Inc.’s 118 percent, UBS AG’s 113 percent and Deutsche Bank AG’s roughly 95 percent.
The Basel Committee on Banking Supervision’s liquidity coverage ratio, scheduled to be phased in starting in two years, requires banks to hold enough “high-quality liquid assets” -- predominantly cash and government debt -- to survive 30 days of stress. The Basel group last month expanded the types of assets that can be counted as liquid.
Morgan Stanley borrowed $107.3 billion, the most of any bank, from the Federal Reserve in September 2008, according to data compiled by Bloomberg News in 2011. Morgan Stanley’s borrowing peaked after hedge funds pulled $128.1 billion from the firm in two weeks, documents released by the Financial Crisis Inquiry Commission show.
Chief Financial Officer Ruth Porat, who took her role at the start of 2010, has attempted to improve the firm’s ability to handle a crisis by relying on longer-term secured loans, holding more liquid assets and reducing its reliance on prime-brokerage clients for funding. Porat is being considered for the role of deputy Treasury secretary, people familiar with the matter said last month.
Barclays Plc said this week that its LCR estimate was 126 percent, up from 103 percent before the Basel group’s revised rules. JPMorgan Chase & Co. said it would be in compliance with the rule, which will eventually require firms to have a ratio of at least 100 percent, by the end of 2013. Goldman Sachs Group Inc. said it is well-positioned for the rule, without providing figures.