Banks will get more time to build up cash buffers to protect against market shocks under a rule change that could help free up credit for struggling economies, a European regulatory source said.
The Basel Committee, made up of banking supervisors from nearly 30 countries, is expected to announce the revision on Sunday to its "liquidity coverage" ratio or LCR, part of efforts to make banks less likely to need taxpayer help again in a crisis.
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The change comes after heavy pressure from banks and some regulators, who feared Basel's original version would suck up too much liquidity at a time when ailing economies are badly in need of a ready supply of credit to finance growth.
Banks were required to comply with the LCR by 2015, but will now get more time, the source said. The Basel Committee had no immediate comment.
The LCR requires banks to hold enough liquid assets like easily sellable government and corporate bonds to cover net ouflows for up to a month. Under the Basel III regime, the LCR rules would run alongside separate rules governing banks' capital, intended to ensure their longer-term stability.
"In principle, there will be a phase-in similar to what we have for capital requirements. There is no reason to treat liquidity differently from capital," the source said on condition of anonymity due to the issue's sensitivity.
Banks would still start complying in 2015, perhaps holding about 60 percent of the buffer and building up to 100 percent by the start of 2019, when Basel's separate, tougher bank capital requirements also must be met in full.
The International Monetary Fund estimated in its April 2012 Global Financial Stability Report the LCR could increase demand for safe assets by $2 trillion to $4 trillion globally.
Barring any last-minute setback, the change will be endorsed on Sunday by the Basel Committee's oversight body chaired by Bank of England Governor Mervyn King.
King and Basel Committee Chairman Stefan Ingves, who also heads the Swedish central bank, hold a news conference at 11 a.m. ET on the same day.
The liquidity rule is the first such global requirement on banks and is meant to avoid a repeat of how a short-term funding freeze brought down lenders like Britain's Northern Rock early on in the 2007-09 financial crisis.
It is part of the Basel III bank capital and liquidity accord agreed by world leaders in 2010 and being phased in over six years from this month, though there are delays in the United States and European Union.
Banks hope the Basel Committee will allow a less severe "stress scenario" for calculating the amount of liquid assets they must hold, meaning the buffer would be smaller.
Banks expect more flexibility on the range of assets they can include in the buffer but could face more stringent requirements to cover derivatives.
(Editing by Matthew Tostevin and David Holmes)