EBA definition of liquidity needs qualitative overlay

The European Banking Authority is charged with defining liquid covered bonds for the Liquidity Coverage Ratio. Bonds that find a good bid might may not have much turnover and could therefore be excluded. Conversely, bonds which have a high turnover are more likely to be included but will be more volatile. This dynamic suggests the EBA cannot exclusively rely on data for decising what goes into the LCR and what doesn't. It will need to have a qualitative overlay.