7 Jan 2013

Central bank asset rules eased

1:29 pm on 7 January 2013

Central banks and regulators have for the first time agreed rules on the minimum quantities of cash or sellable assets banks must hold in an effort to prevent another international financial crisis.

The deal was decided by the Basel Committee on Banking Supervision in Switzerland.

The new rules are part of efforts to prevent financial shocks such as those prompted by the 2007 run on Northern Rock in Britain or by the 2008 collapse of Lehman Brothers in the United States, the BBC reports.

The "liquidity coverage ratio" will be phased in from 2015 and take full effect four years later.

Analysts say the rules announced on Sunday are more flexible than a draft version.

Banks will have to hold enough cash and easily sellable assets to tide them over during an acute 30-day crisis.

The final version of the rules updates a draft version put forward more than two years ago.

Analysts had warned that over-stringent standards could reduce lending and stifle economic growth.

The new version allows banks to hold a broader range of eligible assets, including some shares, corporate bonds, and high-quality residential mortgage backed securities. It also gives them more time to comply with the new standards.

The Basel Committee brings together representatives regulators from 27 nations.