On January 1, 2015, Basel III will be implemented into the U.S. Previously, the public sector compensated banks with cash balances to receive services and credits for those balances. What exactly does this change mean? A recent Trade Financing Matters article highlighted the importance of the new legislation, and what it means for the future of banking.
One part of Basel III is called the Liquidity Coverage Ratio (LCR), which ensures that banks have the necessary on-hand assets to ride out short-term liquidity disruptions. Financial institutions hold an amount of highly-liquid assets, such as cash or Treasury bonds, equal to offset net cash outflows over a 30-day period. In 2015, the full 100 percent minimum coverage will also be in full force.
The news source explained that this impacts every bank business. However, businesses that traditionally used balances to offset fees, as well as organizations like Correspondent Banking and Trade Finance will be affected.
According to the news source, this is the perfect time for p-card implementation.
“Municipal governments will be ripe for p-card and other products as they look to extend terms with their suppliers to offset the significant fees they will need to pay,” the article read. “Already, governments aren’t the best payers in the world.”
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