Global Banking Regulators to Force Banks to Hold More Liquid Assets

From the Reuters,

Global banking regulators will press ahead with the first worldwide effort to force banks to hold more liquid assets, the chairman of the Basel Committee on Banking Supervision said in an interview with the Financial Times on Monday.

Stefan Ingves, who also heads the Swedish central bank, said the Basel group plans to put uniform implementation of the Basel III reforms at the top of its agenda.

The measures, which will also force banks to cut back on short-term funding, have come under scrutiny from some of the 27 member countries who say the rule changes could damage the broader economy.

The reforms, which were agreed to by the member states, will force banks to hold more top-quality capital against unexpected losses, but there are rising concerns that some countries will not stick to the agreement.

Bank capital standards will continue to put pressure on the markets as I explain here and here. More liquid assets will not stop the consequent crisis from central banking induced bubble cycles. In fact, this could worsen it.

By forcing banks to hold more liquid assets, which will likely come in the form of government debt, this compels banks to finance financially strained governments. So productive capital will be channeled to preserve the privileges of the political and the banking class at the expense of the economy, which signifies a form of financial repression.

Central bank based bank capital regulations are essentially aimed at the preservation of the unsustainable banking system-central banking-welfare-warfare state political economy.