Basel will loosen liquidity rules, reports Bloomberg

When it comes to lobbying to water down regulation, banks are the masters. The asset management industry (especially CLO managers) could learn a trick or two from them. And banks know that they only need to whisper the words “reduced lending to small businesses” to terrify regulators into submission. The reality is that cash hoarding is not an “unintended consequence” of the liquidity rules – which are just about the only aspect of the Basel reforms that make any sense. The liquidity rules are supposed to make banks hoard cash if they have liabilities that could evaporate in the blink of an eye (which all of them do).

One of the key lessons of the Credit Crisis is that financial institutions should not assume the markets will always "be there" to refinance their borrowings. Now the BCBS will cave to the politicians on this simple core issue?! What's the point of having a regulator that is deliberately blind to cause and effect? Cash hoarding did not cause any bank failures.