Banks seek medium-term deposits to meet new liquidity rules
Banks are shifting their focus to medium-term deposits to meet new liquidity coverage ratio (LCR) rules, effective April 1. They prefer non-callable deposits with maturities of two to five years, despite the higher costs associated with them. The revised LCR rules increase the run-off factor for retail deposits, requiring banks to invest more in liquid securities. This change aims to ensure banks can manage potential liquidity issues more effectively. Some banks have already begun raising medium-term funds to comply with the new regulations. For example, CSB Bank recently secured $400 million in funding with maturities of one to three years to address LCR adjustments.