CRD V

[Lauren]

What is the CRD V? I'm completely lost, I think it may be something to do with liquidity and banks

 

[TCLA Community Assistant]

@Jaysen @LM - would either of you be able to help with this?

 

[Daniel Boden]

What is the CRD V? I'm completely lost, I think it may be something to do with liquidity and banks

CRD V is the fifth package of the Capital Requirements Directives (CRD) for the financial services industry. The Directives were introduced by the EU to reflect the Basel II and Basel III rules on capital measurement and capital standards (such as liquidity requirements as you mentioned) for banks and other financial services which were introduced following the 2007/2008 Global Financial Crisis.

The Bank of England has produced a note explaining the changes which I'll link below:

Capital Requirements Directive V (CRD V)

Consultation Paper 12/20

www.bankofengland.co.uk

 

[Jacob Miller]

What is the CRD V? I'm completely lost, I think it may be something to do with liquidity and banks

Everything Dan has said is spot on:

CRD V is the fifth package of the Capital Requirements Directives (CRD) for the financial services industry. The Directives were introduced by the EU to reflect the Basel II and Basel III rules on capital measurement and capital standards (such as liquidity requirements as you mentioned) for banks and other financial services which were introduced following the 2007/2008 Global Financial Crisis.

The Bank of England has produced a note explaining the changes which I'll link below:

Capital Requirements Directive V (CRD V)

Consultation Paper 12/20

www.bankofengland.co.uk

One of the major risks identified after the GFC was the fact that banks and institutions had almost non-existent corporate governance, were severely undercapitalised and horrifically overexposed to risky markets. Britain also saw a run in the banks (e.g. Northern Rock) indicating huge liquidity issues. CRD arising from Basel 2/3 was one of a variety of measures brought in to prevent similar situations from happening again through both direct and indirect means.

 

[Jacob Miller]

Just to supplement my above, I find Investopedia's breakdown of the background to the issues and Basel 3 more generally quite good:

What is the minimum liquidity coverage ratio required under Basel III?

The minimum liquidity coverage ratio banks must have under the Basel III standards are phased in beginning at 70% in 2016 and increasing to 100% by 2019.

www.investopedia.com