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"RBI cuts statutory liquidity ratio by 50 bps to release Rs 39,000 crore of liquidity for banks", The Economic Times, 3 June 2014. "Latest RBI Master Circular on Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)" , Reserve Bank of India , 1 July 2011 .
Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money through repurchase agreements (repos) that is primarily used by the Reserve Bank of India (RBI). [ 1 ] The LAF is used to aid banks in adjusting the day to day mismatches in liquidity .
Basel III requires banks to have a minimum CET1 ratio (Common Tier 1 capital divided by risk-weighted assets (RWAs)) at all times of: . 4.5%; Plus: A mandatory "capital conservation buffer" or "stress capital buffer requirement", equivalent to at least 2.5% of risk-weighted assets, but could be higher based on results from stress tests, as determined by national regulators.
In theory, this meant that commercial banks could retain zero reserves. The average cash reserve ratio across the entire United Kingdom banking system, though, was higher during that period, at about 0.15% as of 1999. [10] From 1971 to 1980, the commercial banks all agreed to a reserve ratio of 1.5%. In 1981 this requirement was abolished. [10]
In addition to changes in capital requirements, Basel III also contains two entirely new liquidity requirements: the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR). On October 31, 2014, the Basel Committee on Banking Supervision issued its final Net Stable Funding Ratio (it was initially proposed in 2010 and re-proposed ...
In 2010, the UK Financial Services Authority (FSA) introduced a new liquidity regulation known as the Individual Liquidity Guidance (ILG). In 2013, the Basel Committee on Banking Supervision agreed on a Liquidity Coverage Ratio (LCR), which is similar in design to the ILG but plays a role in an international playing field.
Prior to the 1991 financial reforms, RBI's major source of funding and control over credit and interest rates was the cash reserve ratio (CRR) and the SLR (Statutory Liquidity Ratio). But after the reforms, the use of CRR as an effective tool was deemphasized and the use of open market operations increased.
Under the Basel II guidelines, banks are allowed to use their own estimated risk parameters for the purpose of calculating regulatory capital.This is known as the internal ratings-based (IRB) approach to capital requirements for credit risk.