Original Research

The regulatory treatment of liquidity risk in South Africa

Johann Jacobs
South African Journal of Economic and Management Sciences | Vol 15, No 3 | a209 | DOI: https://doi.org/10.4102/sajems.v15i3.209 | © 2012 Johann Jacobs | This work is licensed under CC Attribution 4.0
Submitted: 20 May 2011 | Published: 22 August 2012

About the author(s)

Johann Jacobs, MMI Holdings Ltd, South Africa

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The Basel accord describes the regulatory capital requirements for credit, market and operational risk. The accord aims to provide guidelines to level the playing field for all internationally active banks and to protect consumers against these risks. Despite the growing significance to bank solvency of liquidity risk, it is omitted from the new accord2. Banks are not required to measure and manage this risk yet they are often considerably exposed to the threat of severely diminished liquidity. This omission from the accord could have dire consequences for banks and the economy in which they operate: liquidity crises can occur without warning and spread quickly to other parts of the financial system. This article critically explores current practices in South Africa and proposes guidelines for effective liquidity risk regulation.


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