Regulators have spent decades constructing elaborate rules for bank capital, but prescriptions on how banks should manage liquidity are much thinner on the ground. Enter the Reserve Bank of New Zealand, which has become the first authority to pass hard-and-fast rules for liquidity since the crisis. Locally incorporated banks will be expected to meet a trio of specific funding ratios within a couple of years. Two "mismatch" ratios are designed to ensure that banks have enough cash and liquid assets readily available if creditors suddenly come calling. The third measure, arn"core funding ratio" (cfr), is more novel. At least 75% of banks' total lending will have to be funded with stickier liabilities such as retail deposits and wholesale borrowing maturing in more than a year. Depositors are less likely to yank their money because it is insured; with luck, any crisis will have passed before longer-term wholesale debts come due.
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