Newsletter April 2011: Top regulator defends Basel III liquidity rules

BASEL – A strong defence of the controversial new liquidity ratios for banks, a key part of the proposed Basel III regime, has been made by a top regulator involved in its construction. The success of the planned liquidity framework “should not be measured in terms of whether it will have zero cost. Instead, the better measure of success is whether the framework corrects pre-crisis extremes at acceptable costs,” Stefan Walter, Basel Committee secretary general told a regulatory conference in early April. “Banks that take on excessive liquidity risk should be penalised under the new framework, while sound business models should continue to thrive,” he said.