What is the Liquidity Coverage Ratio for Banks and why should we Care that it has been Watered Down?

“Massive softening of Basel bank rules” read the headline in the print edition of Monday’s Financial Times. “Betrayed by Basel,” wrote Simon Johnson in a blistering post on his New York Times blog. At issue was a rule called the liquidity coverage ratio promulgated by the Basel Committee on Banking Supervision. If you are a banking wonk, the headlines would have been enough, but in case you are among those who are hazy on just what the liquidity coverage ratio is, what the Basel Committee does, and why we should care, read on. >>>More

Note to econ instructors: Check out these two slideshows on Basel III capital regulations and liquidity regulations for additional classroom-ready material.