Basel III was the response from regulators to the global financial crisis. While it's had several objectives, it introduced global liquidity standards and supervisory monitoring for the first time in the Basel accords. The liquidity coverage ratio requires banks to have sufficient high quality liquid assets to survive a 30 day stress scenario where they are unable to raise additional financing from wholesale markets. This requires banks to forecast their contractual cash inflows and outflows over the next 30 days and to ensure that they have enough high quality liquid assets now to cover any 30 day net cash outflow position.

High quality liquid assets are defined as cash or assets, which can be quickly converted into cash with no significant loss in value.

The second new requirement was the net stable funding ratio. This is a longer term liquidity measure designed to address liquidity mismatches, which requires that a bank has available stable funding greater than its required stable funding. In simplistic terms, a bank's available stable funding includes its shareholders equity and any debt financing not due for repayment in the next 12 months.

Again, on a simplistic basis, a bank's required stable funding. Is the funding necessary for its assets holdings of more than one year to maturity? Basel III also included a framework for best practice liquidity management from the liquidity lessons learned from the 2008 global financial crisis. This framework is called the Principles for Sound Liquidity Management and Supervision, and it focuses on ensuring that banks have a full understanding of their liquidity, risk tolerance, identify and measure their liquidity risk exposure, design appropriate stress tests, and manage intraday liquidity risk appropriately.