Part V Basel III Requirements, 21 Liquidity Requirements
- Basel 3 — Basel 2 — Liquidity — Supervision — UK Financial Services Authority (FSA) — Bonds
21.01 The purpose of banks is maturity transformation—in effect borrowing money from the future to spend in the present. Banks are consequently structurally illiquid, since they could never repay today all of the obligations that could be demanded today. The issue for regulators as regards banking is therefore not whether banks should be permitted to run liquidity risk—they do; that is their function—but as to how much liquidity risk they should be permitted to run. 21.02 Liquidity supervision has historically been applied by national supervisors not only to banks...