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FINMA publishes new "Liquidity – banks" circular

The Swiss Financial Market Supervisory Authority FINMA is putting a new circular on the liquidity requirements for banks into effect on 1 January 2013. In the circular, FINMA specifies the implementation of the new ordinance on liquidity adopted by the Federal Council on 30 November 2012. This ordinance will also come into force on 1 January 2013.

Banks must at all times have enough liquidity to honour their payment obligations in crisis situations. This is why attention has not only focused on capital requirements but also on liquidity requirements, which are gradually being adjusted as part of the Basel III regime. Moreover, Switzerland is also implementing qualitative requirements for liquidity risk management, requirements which are likewise included in the standards prescribed by the Basel Committee on Banking Supervision.

Reporting and qualitative requirements

Prior to the mandatory introduction of quantitative regulatory liquidity standards, observation periods are planned during which the effects of the liquidity coverage ratio (LCR) as a short-term measure and the net stable funding ratio (NSFR) as a long-term measure will be monitored. Initially, the Basel Committee will focus on the introduction of a reporting requirement for the short-term liquidity standard (LCR). It is planned to introduce the LCR as a minimum standard by 2015 while the NSFR will move to a minimum standard by 2018. The "Liquidity – banks" circular puts into practice the reporting requirement for the short-term liquidity standard (LCR) and stipulates, on the other hand, new qualitative principles for adequate risk management and the supervision of liquidity risks.

Changes to the consultation drafts

The new liquidity regulations were formulated by a national work group comprising sector and authority representatives, and were accompanied by a voluntary pilot survey in which 40 institutions had taken part since the beginning of 2012. The consultation on the "Liquidity – banks" circular was welcomed: comments mostly concerned the drafting of the qualitative requirements for liquidity risk management. Proposals for improvements were largely taken into account, particularly with regard to exemptions for smaller banks.

Contact
Tobias Lux, Media Spokesperson, phone +41 (0)31 327 91 71, tobias.lux@finma.ch