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Regular readers of my posts will know that I’m a bit of a policy wonk. I find myself digging into obscure reports, documents and opinion pieces on all things liquidity related, particularly where there is an intraday angle.
So, imagine my delight when I picked up the “12th progress report on adoption of the Basel regulatory framework” (http://www.bis.org/bcbs/publ/d404.pdf). I like to read such treasures, translate the complexity inside and share what it all means to those with more sensible things to do with their time.
As I hoped there is some interesting feedback on the rollout of intraday regulation. But on this occasion, I’m not sure how to reveal what I really think. Please read on…
What is the progress report about?
This is the regular report that the Basel committee issues to say how each country is getting on in implementing the various ‘Basel standards’. It covers 27 member jurisdictions (actually 28 as they include the EU as a separate entity).
It covers many items across risk-based capital and liquidity standards. For the first time this latest progress report includes intraday liquidity and explains how each member is getting on with implementing the BCBS248 intraday regime (http://www.bis.org/publ/bcbs248.htm).
What does the report say?
This is where it gets interesting. Apparently 20 out of the 27 members have fully implemented the BCBS248 regime. I find this a simply staggering finding. I know from my discussions around the globe that very few regulators have implemented a regime where all their banks are providing monthly reports on their intraday positions. Yet according to the report:
There are many other discrepancies between the reported position and the evidence that I have seen on my travels in the real world. A few generic themes appear:
What does all this mean?
Frankly it’s hard to say as I can suggest a few, possibly conflicting, hypotheses:
Now does any of this really matter, other than to a perfectionist policy wonk like me? Maybe yes, maybe no – ultimately local regulators will still make intraday liquidity risk assessments when supervising their banks. But remember, I’ve only focused on one of about 18 items that make up the Basel III progress review.
Let’s hope the remaining 17 areas have been reviewed thoroughly and attention is being focused on any laggards generating risk to the global financial system.