would agree with that one myself.
I dont know if there is any regulation in terms of reserves, etc for liquidity purposes. however, the Basel committee has regulations capitalisiation that imply (or better) induce banks to keep cash
it has been some time since i have been involved with that, so my answers will be 10 years old. but here you go:
premise is 8% capital on risky assets.
a) cash, short term government bonds, and sovereign bonds (investment grade) have 0% risk weighting (i.e no need to tie capital to it)
b) loans: for every pound the bank lends, at the most 92% can come from deposits, and at least 8% from the banks capital.
so as a result, you have a regulation that induces banks to optimise a portfolio in terms of profitability given a capitalisation constraint. therefore there still exists the equivalent of a "reserve requirement". the question is what % of assets that will be.
hope it helps
Thanks Jacinto, it does. It's good to know some of the nitty gritty stuff.