jeremy c stein : liquidity regulation and central banking speech by mr jeremy c stein, member of the board of governors of the federal reserve system, at the “ finding the right balance ” 2013 credit markets symposium, sponsored by the federal reserve bank of richmond, charlotte, north carolina, 19 april 2013. * * * i ’ d like to talk today about one important element of the international regulatory reform agenda – namely, liquidity regulation. 1 liquidity regulation is a relatively new, post - crisis addition to the financial stability toolkit. key elements include the liquidity coverage ratio ( lcr ), which was recently finalized by the basel committee on banking supervision, and the net stable funding ratio, which is still a work in progress. in what follows, i will focus on the lcr. the stated goal of the lcr is straightforward, even if some aspects of its design are less so. in the words of the basel committee, “ the objective of the lcr is to promote the short - term resilience of the liquidity risk profile of banks. it does this by ensuring that banks have an adequate stock of unencumbered high - quality liquid assets ( hqla ) that can be converted easily and immediately in private markets into cash to meet their liquidity needs for a 30 calendar day liquidity stress scenario. ” 2 in other words, each bank is required to model its total outflows over 30 days in a liquidity stress event and then to hold hqla sufficient to accommodate those outflows. this requirement is implemented with a ratio test, where modeled outflows go in the denominator and the stock of hqla goes in the numerator ; when the ratio equals or exceeds 100 percent, the requirement is satisfied. the basel committee issued the first version of the lcr in december 2010. in january of this year, the committee issued a revised final version of the lcr, following an endorsement by its governing body, the group of governors and heads of supervision ( ghos ). the revision expands the range of assets that can count as hqla and also adjusts some of the assumptions that govern the modeling of net outflows in a stress scenario. in addition, the committee agreed in january to a gradual phase - in of the lcr, so that it only becomes fully effective on an international basis in january 2019. on the domestic front, the federal reserve expects that the u. s. banking agencies will issue a proposal later this

jean - claude trichet : the current state of the eu banking sector speech by mr jean - claude trichet, president of the european central bank, at the annual congress of german savings banks, frankfurt, 5 may 2004. * * * ladies and gentlemen, it is both a pleasure and an honour to be invited to speak here today at the annual congress of german savings banks. being in front of such a distinguished audience of representatives of the financial community, i would like to present some views on the current state of play in the european banking sector. i will in particular analyse the factors that have contributed to its resilience over recent years. since 2000, eu banks have been confronted by an extraordinary combination of adverse financial market shocks against the backdrop of a slow - down in the economy. some commentators have even been surprised by the few banking problems in the euro area during this period, given that earlier episodes of slow growth often went hand in hand with severe problems in the sector. for central banks and banking supervisors, the resilience of the eu banking sector is, of course, very good news. at the same time, it raises a number of questions. what is now so different compared with the stressful periods that banks experienced in the past and what factors have contributed to this resilience? a turbulent period for eu banks but before addressing these issues, let me start by briefly recalling how challenging the environment has actually been for eu banks over recent years. without a doubt, the most momentous technical and strategic challenge was the introduction of the single currency, now more than five years ago. the very smooth transition that followed the adoption of the euro almost makes us forget the uncertainties, and sometimes even concerns, expressed before 1999 about the structural implications the euro might have on the euro area banking sector. the second challenge faced by banks in recent years was that not long after the banking sector had begun to adjust to operating with a new currency - including all of the efforts that this entailed - an exceptional series of adverse events followed in quick succession. after an almost uninterrupted stock market boom since 1995, a severe stock market correction set in in march 2000 and investors faced three consecutive years of negative returns. investor confidence was also badly shaken by unprecedented episodes of serious corporate malfeasance. although most of the main abuses took place abroad, europe also had its fair share. over time, we have observed that banks have increasingly diversified into securities trading, investment banking and asset