Publication

This paper discusses the approach to be taken with regard to the control of liquidity in the EU. Specific liquidity requirements are an additional means to safeguard the stability of financial systems and have to be supervised. This supervision is not harmonized in the EU, but left to the host country and therefore a matter of supervisory discretion, which leads to difficult home/host discussions. Above all, the implementation of the New Basel Accord in European law nourishes this discussion. Therefore, the paper argues that the Committee of European Banking Supervisors (CEBS) should initiate some standardization process specifying what liquidity control actually encompasses. The longer-term goal would be to strengthen the home-country control regime in an EU context. Furthermore, it discusses the development in financial market liquidity and the possible impact of the New Basel Accord on the liquidity of financial institutions, concluding with policy recommendations regarding the context of the EU financial regulation.