Covered bonds make LCR portfolios ‘non-compliant'
Some European bank liquidity portfolios are ‘materially non-compliant’ with the recommendations of the Basel Committee on Banking Supervision, because of the inclusion of covered bonds as high quality liquid assets, the BCBS said on Monday.
The BCBS said in a report published on July 3 that European Union regulations on the Liquidity Coverage Ratio (LCR) permit the inclusion of certain financial instruments that do not fulfil Level 1 High Quality Liquid Asset (HQLA) requirements stipulated in the Basel LCR standard.
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