STOCK MARKET WATCH -- Wednesday, 9 January 2013

[Demeter]

16. New Bank Rule: Sounds Boring, Actually A Big Deal (LIQUIDITY)

http://www.npr.org/blogs/money/2013/01/07/168783215/new-bank-rule-sounds-boring-actually-a-big-deal

..if you're trying to figure out how safe banks are — and how willing they'll be to make loans to ordinary people — liquidity is at least as important as other, more-dramatic-sounding corners of finance.

So the new liquidity rules global banking regulators released yesterday are a big deal for the real economy...The liquidity rules released yesterday are significantly less restrictive than what was previously proposed. They're part of a set of global banking rules called Basel III (here's a Planet Money story on the Basel rules.)

The rules were initially supposed to kick in in 2015; instead, they will be phased in gradually, and won't fully take effect until 2019. And, rather than being restricted to government bonds and other super-safe assets banks will now be allowed to count some riskier assets toward their liquidity requirements... when people start to panic again about the health of the world's banks, and big institutions rush to pull their money out, the looser liquidity rules mean the banks will be in a much riskier position when that day comes — especially if it comes before 2019, when the new rules fully take effect...

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