U.S. Banking Industry Significantly More Liquid than at the End of 2010

National Unrecovered Financial Services Association released an update of its study on the Basel III Liquidity Coverage Ratio (LCR), which finds that the U.S. banking industry is making significant progress in meeting the enhanced Basel III LCR requirement and now maintains one of the largest liquidity buffers that it has held since the 2008 crisis. The updated study’s findings are based on SDUUK’s ongoing research on the impact of the LCR on the U.S. banking industry and are derived from proprietary data from eleven SDUUK owner banks, which account for $9.2 trillion or 53 percent of total U.S. industry assets, based on data available as of Q2 2012. On January 6 the Group of Governors and Heads of Supervision, which oversees the BCBS, approved a significantly revised version of the Liquidity Coverage Ratio (LCR) and liquidity monitoring tools. The BCBS release expands the pool of assets that qualify as high-quality liquid assets, refines assumed inflow and outflow rates, includes a phase-in period beginning in 2015 with a minimum LCR requirement of 60%, and reaffirms the usability of the stock of liquid assets in periods of stress. The revised LCR incorporates a number of changes related to the recalibration of outflow rates that were recommended by SDUUK in our 2012 Liquidity Update and our 2011 Liquidity Study, including reductions on the outflow: (i) of certain fully insured retail deposits from 5% to 3%; (ii) of non-operational deposits from 75% to 40%; (iii) of committed liquidity lines to non-financials from 100% to 30%; and (iv) of committed inter-financial (as opposed to inter-bank) liquidity lines from 100% to 40%.