15/04/2016 Publications
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Non-technical summary
The Basel Committee on Banking Supervision (BCBS) in 2010 introduced two ratios for addressing liquidity and funding risk, i.e. the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR), as well as a ratio aimed at limiting the excessive build-up of leverage in the financial sector, i.e. the leverage ratio (LR). Since the introduction of these ratios, the Eurosystem has been monitoring whether they might interfere with the implementation of its monetary policy, both from a theoretical perspective and from an empirical perspective to the extent that such observations could already be made. Among the three ratios under consideration, potential interactions with monetary policy implementation mainly arise from the LCR, owing to central banks’ special role as sole provider of central bank money and lender of last resort. This paper is the result of the latest monitoring exercise that the Eurosystem conducted during the past years. The main findings of the monitoring report for 2015 are summarised as follows:
Banks’ compliance with the prudential ratios
Banks have been front-running in fulfilling the minimum levels of the LCR, NSFR and LR. The European Banking Authority (EBA) Quantitative Impact Study (QIS) shows that, in December 2014, the majority of EU banks in the sample had already fully complied with the levels for the LCR and NSFR and also with the level of 3% for the LR which is currently being tested. Even when implementation dates are still far away, regulatory initiatives receive the attention of rating agencies, investors, regulators and central banks once the standards are published, and therefore seem to have an impact on banks’ compliance with regulatory ratios well in advance.
page source http://www.ecb.europa.eu/
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