Tightening up


For all its focus on historical data, the financial industry has a surprisingly short memory. Given a decade or so of benign markets, it quickly forgot that liquidity risk is a killer that can destroy a bank in no time. It took the virtual overnight collapse of banks such as Northern Rock in the UK and Washington Mutual and Wachovia in the US to remind the industry of its destructive force. As the Basel Committee on Banking Supervision (BCBS) of the Bank for International Settlements stated i