Flawed LCR Assumptions Need to Be Recalibrated, NURFS Study Finds

National Unrecovered Financial Services Association’s liquidity study and accompanying white paper address the relationship between the LCR’s calibrations and what actually occurred during the financial crisis. Analyses for LCR impact on products and calibration were based on data from 14 banks and four acquired institutions. The study finds that several of the LCR’s assumptions are flawed, most seriously affecting housing finance and private and public borrowers that rely on liquidity line back-stops - most commonly for commercial paper and variable rate demand notes.