BCBS published reports assessing the implementation of the liquidity coverage ratio (LCR) in China, EU, and the United States. Overall, the LCR regulations in China and the United States have been assessed as "compliant" (highest of the four possible grades) with the Basel framework while the EU LCR regulations were found to be "largely compliant" (one notch below the highest possible grade).
The largely compliant assessment of EU reflects that most but not all provisions of the Basel standard were incorporated in the EU LCR framework. The EU framework components for high-quality liquid assets or HQLA, inflows, and disclosure requirements have been assessed as largely compliant while the other LCR component, outflows, has been assessed as compliant. As at March 31, 2017 (cut-off date), the Assessment Team reported 20 remaining deviations from the Basel LCR standards. The majority of these deviations are not assessed as having a quantitatively or qualitatively material impact at the time of the Regulatory Consistency Assessment Program (RCAP) review. Nevertheless, the Assessment Team identified one material deviation and four potentially material deviations that significantly overstate or may overstate the LCR for some banks in the EU and, in turn, may thus affect both fairness and comparability.
These assessment reports form part of a series of publications on the implementation of Basel standards in the Committee's member jurisdictions. The Regulatory Consistency Assessment Program (RCAP) is a central element of the Basel Committee's continuing efforts to promote timely adoption of its standards and to monitor its members' full and consistent compliance with the Basel framework. The RCAP helps member jurisdictions identify deviations from the Basel framework, weigh the materiality of any deviations, and undertake necessary reforms. Based on these findings, many jurisdictions have already amended their regulations to align them more closely with the Basel framework, thus helping to promote global financial stability and a level playing field for internationally active banks.
Keywords: International, BCBS, Banking, LCR, RCAP, United States, China, Basel III, European Union