Basel III at a glance
■ Banks are being forced to raise liquidity buffers to make sure they can survive a month of tough conditions without getting central bank help
■ Bank argue that diverting resources into that buffer could harm lending at a time when the economy is already weak
■ After yesterday’s meeting, banks will now been given more time to meet the requirements
■ They will need to build up 60 per cent of the required buffer by 2015 – not the full amount as had earlier been planned
■ It must then be built up to 100 per cent by 2019
■ Right now, the buffers are artificially enlarged by central bank support – which is expected to be reduced over the coming years
■ That means banks need to replace that with other instruments
■ Regulators have allowed them to use a much wider range of instruments to fill that gap
■ That includes corporate bonds, equities and retail mortgage-backed securities – as long as they are of high quality
■ But the buffer is only needed when times get tough – and when that happens, those instruments’ values will fall – so banks must apply a haircut of between 25 and 50 per cent when using the instruments
■ On top of that, only 40 per cent of the buffer can be made of the wider pool of assets
■ The riskiest of the permissable instruments can only make up a maximum of 15 per cent of the buffer, in an effort to keep it mainly made up of top-notch assets