Basel LCR changes confuse market with lower rated covered treatment
The Basel Committee for Banking Supervision’s decision to expand the range of assets banks can hold in their liquidity coverage ratio (LCR) has split the covered bond market over what will happen to bonds rated lower than AA-.
While the committee maintains that covered bonds rated below this level are not be eligible for inclusion in the LCR, some analysts believe this position could change.
Covered bonds will continue to qualify as Level 2 assets. However under the recent changes Level 2 will now be divided into
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