Regulators soften stance on liquidity deadline for banks

The initial deadline of 2015 to meet global liquidity standards was put back by four years after banks argued that they would be restricted from lending to the wider economy.

Barclays shares rose nearly four per cent in early trading, topping the risers’ board by climbing up 10.25p to 286. 95p.

The Basel Committee on Banking Supervision also widened the types of liquid assets that will count towards their cash buffers, including some equities and high-quality mortgage-backed securities.

Analysts at Credit Suisse said the revisions were “a clear sign” that regulators are adapting to the changing economic environment.

Banks have been fighting hard to delay implementation and alter parts of the liquidity coverage ratio (LCR) rules – governing the level of easily tradeable assets such as government bonds they need to hold to ensure their stability if markets freeze up.

Some top regulators also warned the original rules, which were due to come into force by 2015, would cut lending just when they are trying to encourage the flow of money to help kick-start economic recovery.

The aim is to better protect taxpayers from having to bail out banks and avoid a repeat of the 2007-09 financial crisis.

A liquidity rule could have prevented the short-term funding freeze that brought down lenders like Northern Rock.

Governor of the Bank of England Sir Mervyn King, who heads the Basel committee’s oversight group, said: “The agreement reached today is a very significant achieve- ment.

“For the first time in regulatory history, we have a truly global minimum standard for bank liquidity.”

He said the phased implementation “will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery”.