The European Central Bank is pushing global banking regulators to relax a draft liquidity rule so that lenders can use some asset-backed securities and loans to businesses in a buffer they must hold against a possible credit squeeze, according to three people familiar with the talks.
The ECB, backed by the Bank of France, considers a draft version of the liquidity coverage ratio, or LCR, may hamper efforts to combat the euro-area debt crisis by curtailing lending and making it harder for central banks to implement their monetary policies, said the people, who couldn’t be identified because the discussions at the Basel Committee on Banking Supervision are private. They said the ECB stance is opposed by some other Basel members, including U.S. regulators.
The Basel committee said last year that it would review the rule to address any unintended consequences, and is targeting a deal by January 2013, when central bank and regulatory chiefs will meet to discuss the plans. The group will attempt to make headway at a meeting next month.
There is little support in the committee for calls from banks for either gold or equities to count as eligible assets under the LCR, the people said, with neither likely to make it into the final version of the standard. In general, euro-area regulators are among the more sympathetic to the case for including some equities.