LCR amendment to help covered bonds

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By Bill Thornhill
30 Jul 2020

After reaching a provisional agreement with member states, the European Commission is expected to open a consultation to amend the liquidity coverage ratio (LCR) for banks during the fourth quarter. The revision is expected to improve the efficiency of covered bond funding as issuers will now be able to count the same 30 day liquidity held within their covered bond programme towards the LCR too.

Under present LCR rules, banks are required to hold sufficient liquidity to cover all payments over the next 30 days. Liquidity is also held in the covered bond programme in the liquid asset buffer to cover all payments over the next 180 days. 

Banks must keep these pools separate, ...

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