Banks moving to build liquidity ahead of Basel III

Banks will be required to hold sizeable liquidity buffers under Basel III, mostly comprising cash, central bank reserves and government debt. But what will this cost, and how are bank treasury desks allocating that expenditure? By Christopher Whittall

Traders are coming to terms with a multitude of changes in the post-crisis world. Among the most profound is the need to think about the liquidity and funding implications of every trade and every loan. This is having a major impact on the market in Europe, in particular. In 2006, European corporates took out €945 billion worth of bank loans, compared with €455 billion in corporate bond issuance. Last year, the number of loans dropped to €338 billion versus €557 billion in bonds. In an