Video: Banks can arbitrage central bank liquidity provision
A conflict between new liquidity regulations under Basel III and existing central bank operations leaves a gap that banks may be able to exploit, warns financial stability expert
There is a conflict between new liquidity ratios under Basel III and existing central bank operations that could create arbitrage opportunities for banks, and ultimately could undermine the risk position of central banks, warns Jeroen Lamoot, a financial stability and policy expert at the National Bank of Belgium.
Speaking at Risk's Basel III conference in London in late September, Lamoot explained that new liquidity ratios under Basel III are primarily designed to ensure banks rely on their own
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