Basel III Liquidity Regulation and Its Implications

Liquidity involves the degree to which an asset can be

bought or sold in the market without affecting its price.

The 2007 to 2009 financial crisis was characterized by a decrease

in liquidity and necessitated the introduction of Basel

III capital and liquidity regulation in 2010. Inside, you’ll

learn how such regulations are applied on a broad crosssection

of countries in order to understand and demonstrate

the implications of Basel III.

This book summarizes the defining features of the Basel

I, II, and III Accords and their perceived shortcomings, as

well as the role of the Basel Committee on Banking Supervision

(BCBS) in promulgating international banking

regulation.

Basel III quantifies liquidity risk by using the measures

liquidity coverage ratio (LCR) and net stable funding

ratio (NSFR). This book discusses approximation

techniques that may be used to estimate these liquidity

measures. Inside, the authors highlight the connections

between liquidity creation and bank capital and provide

you with the details of an investigation of the risks liquidity

creation generates for banks. In addition, we consider

the impact of the implementation of Basel III liquidity

regulation on macroeconomic variables such as GDP, investment,

inflation, consumption, income, savings, and

employment.