Under the Basel III framework, Switzerland is gradually introducing new liquidity regulations for all banks. The circular "Liquidity – banks" focuses on new reporting requirements and requirements for liquidity risk management. The legal basis for the circular is a new liquidity ordinance, the consultation for which is also being opened by the Federal Department of Finance today. Both consultations will close on 1 October 2012.
The Basel III framework drawn up by the Basel Committee on Banking Supervision requires banks to meet internationally harmonised, quantitative liquidity requirements in addition to complying with stricter capital adequacy requirements. The implementation of the Basel III liquidity requirements in Switzerland follows the largely completed implementation of the capital adequacy rules. A step-by-step approach is foreseen to handle the revision involved and expand the current, outdated liquidity requirements. Moreover, Switzerland is introducing qualitative requirements for liquidity risk management based on standards also issued by the Basel Committee.
The Basel Committee will put in place rigorous reporting processes to monitor the standards during an observation period before the introduction of the binding quantitative regulatory liquidity standards, namely the "Liquidity Coverage Ratio" (LCR) as a short-term measure and the "Net Stable Funding Ratio" (NSFR) as a long-term measure. It is planned to introduce the LCR as a minimum standard by 2015 and the NSFR will move to a minimum standard by 2018. The focus of implementation of the new Basel III liquidity requirements in the coming year will be on the introduction of a reporting requirement regarding the short-term liquidity standard, the LCR. The purpose of this reporting requirement is to influence and prepare for further regulation.
New qualitative principles for adequate risk management and supervision of liquidity risks will also be implemented alongside the introduction of LCR reporting.
Tobias Lux, tel. +41 (0)31 327 91 71, email@example.com