The Basel committee has relaxed the requirements of the liquidity coverage ratio (LCR), a move welcomed by the banking industry.

The changes agreed on January 7 include the expansion of the Basel III definition of what assets banks must keep available to use as buffer in case of a financial crisis. High quality liquid assets (HQLAs) will now include corporate debt securities rated A+ to BBB, certain unencumbered equities and certain residential mortgage-backed securities rated AA or higher.

HQLAs already included level 1 assets (cash, certain government securities and other 0% risk-weighted assets).

Additionally, the Basel committee clarified the timescale for implementation of the LCR, beginning on January 1, 2015 with a minimum requirement of 60%, to rise by 10% each year for full implementation on January 1, 2019.

“This graduated approach is designed to ensure that the LCR can be introduced without disruption to the orderly strengthening of banking systems or the ongoing financing of economic activity,” the committee says.

HSBC global head of trade and receivables finance, James Emmett, tells GTR that the bank is still looking at the detail of the new proposal, but “an initial review looks helpful for trade finance”.

Nigel Willis, partner at business advisory firm Deloitte, adds: “The combination of a phased implementation timetable for the LCR, broader definition of what constitutes a liquid asset and confirmation that a bank’s stock of liquid assets can be used in times of stress, strikes a welcome balance between the competing demands of raising regulatory standards to increase confidence in the global financial system, and not impeding the recovery of the global economy.”

The committee specifies that it will be “entirely appropriate for banks to use their stock of HQLA” in periods of stress, and that bank supervisors will be in charge of producing guidance on usability according to circumstances.

Over the next two years, the committee will work on a review of the net stable funding ratio, which extends the scope of international agreement to the structure of banks’ debt liabilities.