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Proposed rule extends big bank liquidity demands

Joe Mont | April 26, 2016

A busy day for bank regulators on Tuesday led to proposed rules dealing with new liquidity requirements, incentive-based compensation, and the way small banks are assessed for deposit insurance.

A “Net Stable Funding rule,” proposed by the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation, would require the largest banks to hold sufficient liquid assets to endure a year-long funding crisis. Described by Comptroller of the Currency Thomas Curry as “one piece of a broader effort to increase the resiliency of the banking system,” the rule will work in concert with the Liquidity Coverage Ratio (LCR) rule issued in September 2014.

The LCR rule required covered institutions to hold “high-quality liquid assets equal to their net cash outflows” over a 30-day period. The new rule would go further, requiring covered institutions to have sources of funding that are stable over a one-year period. Like the liquidity rule, the proposed rule would...

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