Capital and liquidity revision – a new beginning

Professor G A Walker, Centre for Commercial Law Studies, London

A new framework for capital and liquidity regulation has been agreed by the Basel Committee on Banking Supervision. Banks were strongly criticised for holding low capital and liquidity levels immediately before the crisis which prevented them from absorbing subsequent losses as the crisis unfolded. Central banks and finance ministries were then forced to inject substantial amounts of market liquidity and bank capital to re-stabilise the markets.