Iñaki Aldasoro, Gerardo Ferrara, Sam Langfield, Zijun Liu, Tomohiro Ota, 04 December 2019

Macroprudential regulation is in vogue, but liquidity requirements are typically seen only as a microprudential tool. This column shows how a macroprudential approach to liquidity requirements could improve regulatory efficiency. By concentrating liquidity in systemically important banks, financial stability can be enhanced without increasing aggregate requirements.

Stephen Cecchetti, Kim Schoenholtz, 10 May 2018

Clemens Bonner, Sylvester Eijffinger, 14 October 2013

Liquidity requirements like the Basel III Liquidity Coverage Ratio are aimed at reducing banks’ reliance on short-term funding. This may have implications for the implementation of monetary policy, which usually operates through short-term interbank interest rates. This column looks at how banks reacted to the Dutch quantitative liquidity requirement. The authors conclude that liquidity requirements will only reduce overnight interest rates if they cause an aggregate liquidity shortage.

Clemens Bonner, Sylvester Eijffinger, 13 October 2012

Will the new Basel rules make monetary policy less effective? This column looks at how banks responded to the introduction of the Dutch quantitative liquidity requirement. It concludes that a liquidity rule does influence lending rates and volumes in the interbank money market. These effects, however, are at least partially intended and the overall effect of a binding liquidity rule is still positive.

CEPR Policy Research