Bank Liquidity and Capital Best-Practice Principles, 2-Chapter e-Minibook, Feb 2018

With the publication last month from BCBS of the final chapter in Basel III, the key part of which confirmed the 72.5% output floor for RWAs applicable to any bank that applies an internal ratings based approach, firms can now proceed with their final form capital and liquidity management and planning, since every piece of the puzzle is now in place. Of course the core tenets of Basel III have been known since 2010…in that regard, and in anticipation of the publication next month of Moorad Choudhry Anthology, we present Chapters 12 and 16 from his earlier book The Principles of Banking. The first chapter discusses the liquidity risk management aspect of Basel III and its impact, while the second chapter considers both the capital and strategy-setting impact of that regulatory directive. While some banks are affected more than others, there is no doubt that every bank will wish to structure as optimised a balance sheet as possible.