Asian liquidity regime and the transition to Basel III
This comment piece outlines the Asian Liquidity regime and transition to Basel III
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Introduction
The aftermath of the 1997 Asian financial crisis led many jurisdictions in the Asia Pacific region to review the prudential liquidity frameworks they had in place to regulate the financial sector.
The results were that the requirements (with regards to the amount of liquidity a firm should hold) were tightened. Various new metrics were put in place including the introduction of key liquidity ratios, and limits on the amount of net assets over defined time horizons.
Many jurisdictions required firms to meet specific liquidity requirements in a way similar to capital requirements. In addition to these metrics, firms were also required to improve their control and governance infrastructures particularly - as they relate to liquidity. The result was that at the turn of the millennium liquidity regulatory regimes in many Asian countries were among the toughest in the world.
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