2013年-BIS国际清算银行_Liquidity_regulation_and_the_implementation_of_monetary_policy_41页_397kb

Summary of BIS Working Paper No 432: Liquidity Regulation and the Implementation of Monetary Policy

Core Content

This working paper by Morten L. Bech and Todd Keister analyzes the implications of Basel III liquidity regulations, specifically the Liquidity Coverage Ratio (LCR), on the implementation of monetary policy in a corridor system. The paper introduces a model to examine how liquidity regulations influence interbank lending behavior, interest rate dynamics, and the central bank's operational framework.

Main Points

1. Basel III and LCR Overview

• Basel III introduces a new global liquidity regulation framework, including the LCR and NSFR.
• The LCR requires banks to hold enough high-quality liquid assets (HQLA) to cover 30-day net cash outflows under a stress scenario.
• HQLA is divided into two categories:
  • Level 1 assets: Cash, central bank reserves, and certain securities.
  • Level 2 assets: Government securities, corporate bonds, and equities, with Level 2A (up to 40%) and Level 2B (up to 15%) being the subcategories.
• The denominator of the LCR calculation includes run-off rates for deposits, overnight loans, and central bank loans.

2. Impact of LCR on Monetary Policy Implementation

• The LCR creates a new incentive for banks to seek term funding and borrow from central bank facilities to avoid liquidity shortfalls.
• The usual relationship between open market operations and the overnight interest rate becomes steeper due to the LCR requirement.
• The overnight rate may become more or less responsive to changes in central bank reserves depending on the structure of the operation.
• The yield curve can steepen or flatten based on how central banks adjust reserves, which is influenced by the LCR.

3. Model Structure

• The model is based on a one-period framework and assumes banks are price-takers in interbank markets.
• Banks hold loans, bonds, and reserves as assets and have deposits and equity as liabilities.
• The central bank influences interbank activity through open market operations and standing facilities.

4. Regulatory Requirements and Borrowing

• Banks must meet both the reserve requirement and the LCR requirement.
• The reserve requirement is defined by:
  $$
  R^i + \Delta^i + \Delta_T^i - \varepsilon^i + X^i \geq K^i
  $$
• The LCR requirement is defined by:
  $$
  LCR^i = \frac{B^i + R^i + \Delta^i + \Delta_T^i - \varepsilon^i + X^i}{\theta_D(D^i - \varepsilon^i) + \Delta^i + \theta_X X^i} \geq 1
  $$
• The minimum borrowing from the central bank required to meet both requirements is given by:
  $$
  X^i = \max\left{X_K^i, X_C^i, 0\right}
  $$

5. Critical Values and Borrowing Behavior

• Two critical values determine the borrowing behavior:
  • $\varepsilon_K^i$: Threshold for reserve requirement.
  • $\varepsilon_C^i$: Threshold for LCR requirement.
• Depending on the relative values of these thresholds, the borrowing demand is influenced by either the reserve requirement or the LCR requirement.
• If $\varepsilon_K^i < \varepsilon_C^i$, the reserve requirement dominates.
• If $\varepsilon_K^i > \varepsilon_C^i$, the LCR requirement dominates for certain ranges of payment shocks.

6. Profit Maximization and Interest Rates

• Banks maximize their expected profit, which is influenced by:
  • Interest rates on loans, bonds, and interbank transactions.
  • The penalty rate for central bank borrowing ($r_X$) and the interest rate on excess reserves ($r_R$).
• The equilibrium interest rates on overnight and term interbank loans are determined by the regulatory constraints and the distribution of payment shocks.

7. Key Equations and Results

• The overnight interest rate is given by:
  $$
  r = r_R + (r_X - r_R)(1 - G[\hat{\varepsilon}^i])
  $$
• The term interest rate is given by:
  $$
  r_T = r + \frac{r_X - r_R}{1 - \theta_X}(G[\hat{\varepsilon}^i] - G[\varepsilon_C^i])
  $$
• These equations show that the LCR requirement can alter the sensitivity of interest rates to central bank operations.

8. Policy Implications

• The LCR requirement can change the effectiveness of central banks' operational frameworks.
• Central banks may need to monitor liquidity conditions more closely and adjust their policy tools accordingly.
• The revised LCR rules mitigate but do not eliminate the impact of liquidity regulation on monetary policy.

Key Information

• LCR is a key component of Basel III, requiring banks to hold high-quality liquid assets to cover 30-day net cash outflows.
• The LCR can alter the relationship between central bank reserves and interest rates, particularly the overnight rate and the short end of the yield curve.
• The model shows that term funding and central bank borrowing are influenced by the LCR requirement.
• The impact of open market operations on interest rates is sensitive to the structure of the operation and the liquidity conditions of the banking system.
• The paper provides a systematic analysis of how liquidity regulation interacts with monetary policy implementation.

Conclusion

The introduction of the LCR under Basel III has significant implications for central banks' operational frameworks. It can alter the sensitivity of interest rates to open market operations and change the dynamics of interbank lending. Central banks may need to adjust their policies and monitor liquidity conditions more closely to maintain the effectiveness of their monetary policy tools.