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Basel III and Global Liquidity Standards - Are Canadian Banks up to the Challenge?

by Brandon Barnes
Davis LLP - Toronto Office

Eric Belli-Bivar
Davis LLP - Toronto Office

November 20, 2013

Previously published on November 18, 2013

One of many lessons learned from the global financial crisis of 2007-2008 was the relationship between systemic risk and liquidity. The crisis saw financial institutions on both sides of the Atlantic urgently seeking liquidity support from central lenders, without ever having breached their respective capital adequacy requirements. Aside from central lending and emergency support, practical liquidity assurance mechanisms for banks, pre-crisis, appeared to rely to some extent on the sale of assets. The crisis revealed the danger of this strategy. Given the widespread cross-exposure to the credit and liquidity risks of financial institutions in every capital market, globally, would-be purchasers for assets were absent at a time when the availability of leveraged finance was minimal and most major market participants needed to sell.


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