PRA consults on liquidity reform

The PRA is consulting on changing its liquidity requirements so that banks will be able to monetise liquid assets quickly if needed in response to a fast-paced stress event. It uses as an example the Silicon Valley Bank collapse. The PRA proposes to:

• require firms to evaluate their liquidity, identify barriers to monetising assets and conduct internal stress tests on how they would react to rapid outflows within a week;
• remove an exemption for certain assets for annual testing of monetising assets;
• reduce data requests on firms in other related areas, so the new reporting requirements do not result in an overall increase; and
• encourage firms to be operationally prepared to use central bank facilities if needed.

Consultation closes on 17 June.