It’s a case of “When Regulations Collide.” As we’ve seen
in the energy field, contradictory regulations cost jobs
as employers struggle to comply with legal requirements that tell them to do
one thing on the one hand and the opposite on the other. Now we’re seeing
another example in the field of financial regulation, as regulators face a
dilemma between state rules and supranational rules known as Basel
III.
The issue in question relates to regulations over a
bank’s Liquidity Capital Ratio (LQR). At one point ratios such as this were
helpful tools for investors to judge the health of a company. These days, they
are the subject of regulations. The LQR will be a requirement for a certain
amount of liquid capital to be held by a bank to back its liabilities. Of
course, the definition of “liquid capital” can be hazy, so Basel III involves
several complex ways of assessing the liquidity of capital. Some
mortgage-backed securities will meet this standard…..To Read More….
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