The biggest long-term impacts of Basel III on most institutions are those new provisions governing the management and measurement of liquidity risk-with hindsight, sadly lacking in Basel II.
New standards applicable to capital quality and ratios, capital buffers, the capital treatment of counterparty credit risk and securitisation exposures, leverage ratios and large exposure rules are now a hard reality in many jurisdictions.
All institutions of systemic importance – and in some jurisdictions all institutions, irrespective of systemic importance – need to deploy reverse stress-testing and Recovery and Resolution planning.
Even allowing for the regulatory principle of ‘proportionality’, adoption of disciplines such as pricing liquidity risk, liquidity contingency planning and liquidity buffer management will challenge many smaller banks.
KnowCo has a strong pedigree in supporting client institutions in this area in terms of both qualitative and quantitative liquidity regulations.