However, Mayra Rodriguez Valladares, principal of MRV Associates, a firm that offers bank training on regulatory matters, said she is skeptical of the argument that HQLAs increase systemic risk. She said banks are mainly chasing yield due to the low-rate environment and that if banks pursued riskier investments due to liquidity regulation, the effort would be self-defeating.
“If you’re chasing after high-yield bonds or anything like that, then guess what? It negatively impacts your Tier 1 ratio because your risk-weighted assets go up. It also impacts your capital conservation buffer because that’s also based on risk-weighted assets,” Rodriguez Valladares said.