Cash & Liquidity Management

How understanding Basel III’s impact enables better segmentation and structure of liquidity portfolios

Published: Jun 2016
J.P. Morgan Asset Management Thought for the Month – building stronger liquidity strategies – let's solve it.

June 2016

Basel III regulations redefine global standards for bank capital, liquidity and leverage, and will profoundly impact how banks manage their balance sheets. Liquidity investors need to understand how banks will treat deposits under the new rules. In this way, they can most effectively structure and segment their liquidity portfolios to gain the greatest benefit from the new rules and incentives, and maximize their investment returns.

A centerpiece of Basel III – widely described as a “game changer” in the way banks view their deposits – is the liquidity coverage ratio (LCR). It aims to ensure that a bank can meet its liquidity needs in a severe stress scenario. Specifically, the regulation looks to make certain that a bank holds a sufficient stock of unencumbered assets that can be converted into cash within a day, without a decrease in value, to meet all of the bank’s liquidity needs for a 30-day stress scenario. Though Basel III will not be completely implemented until 2019, European and U.S. banks have already started to report under the new regulations, and many large banks are choosing to follow the rules sooner than required.

To find out more, download our white paper, Liquidity Investors and Basel III. You can also download other Liquidity Insights from our J.P. Morgan Global Liquidity website With its user-friendly navigation, you’ll find a seamless connection between liquidity investment solutions and our best thinking, which can help you meet your goals in today’s complex investing environment.

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