The Bank of England’s Prudential Regulation Authority (PRA) has published a consultation proposing updates to its liquidity standards aimed at ensuring banks can turn liquid assets into cash quickly during fast-paced stress events, drawing on lessons from the collapse of Silicon Valley Bank and Credit Suisse in March 2023. The proposals would require firms to assess their liquidity, identify barriers to monetising assets, and run internal stress tests focused on rapid outflows over a one-week horizon alongside the existing one-month reporting. They would also remove an exemption for sovereign bonds and other “level 1 assets” from annual testing of asset monetisation, reduce data requests in other areas to avoid an overall increase in reporting, and encourage operational readiness to use central bank facilities when needed. The PRA frames the package as improving the usability of existing liquid assets rather than increasing the amount firms must hold.
Bank of England 2026-03-17
Bank of England's Prudential Regulation Authority consults on modernising liquidity standards to ensure banks can monetise liquid assets quickly in fast-moving stress events
The Bank of England's Prudential Regulation Authority has issued a consultation on updating liquidity standards to enhance banks' ability to convert liquid assets into cash during stress events, informed by the 2023 collapses of Silicon Valley Bank and Credit Suisse. Proposed measures include requiring firms to assess liquidity barriers, conduct rapid outflow stress tests, and remove exemptions for sovereign bonds in asset monetisation tests. The updates aim to improve asset usability without increasing liquidity holdings.