The Banking regulators are getting excited about liquidity risk, but I am afraid I still have issues with this. And that's because nobody thinks of the implementation aspects of these regulations. Here's an idea, nobody actually has thought about why the previous liquidity risk proposals did not work. And nobody is thinking about how these current proposals will actually operate, much less think about how they will be rolled out.
And we will, most probably be here, in 10 years time, thinking about more regulation. We keep on being told about back testing of our risk models, but has anybody ever tried to do back testing of the regulatory models? I have written a fuller essay on this and hopefully will come up next week.