Hungary aims to implement LCR ahead of schedule

The Central Bank of Hungary will accelerate the implementation of the liquidity coverage ratio (LCR) conceived in the Basel III accord, it announced on August 25.

The proposed Hungarian schedule is much faster than the minimum phase-in requirements. While many jurisdictions are looking to accelerate the process, Hungary appears to be going a step further.

The LCR aims to ensure banks hold sufficient high-quality liquid assets (HQLA) that can be converted to cash fast enough to cover their projected net cash outflows over a 30-day period of stress.

Hungarian credit institutions will now have to achieve 100% coverage by April 1, 2016, the central bank said in a statement, rather than January 1, 2018, as envisaged by the capital requirements directive (CRD) of the European Union.

The CRD is itself an accelerated schedule compared with the Basel minimum. Under the CRD, EU banks must have liquidity coverage of 60% by October 1, 2015, becoming fully compliant by January 1, 2018.

The Bank of England's Prudential Regulation Authority (PRA) is one of a handful of other bodies insisting the banks it oversees follow an accelerated schedule in implementing the LCR.

The PRA has mandated that UK banks should have enough HQLA to meet 80% of its projected net cash outflows in the stressed scenario from October 1, 2015, rising to 90% on January 1, 2017, rather than the CRD's minimum of 80%. Nonetheless, UK banks will only have to have achieve 100% coverage by the CRD's mandatory date of January 1, 2018.