Foreign bank branches in Australia will need to hold "liquid assets equal to at least nine per cent of the aggregate value of external liabilities", with the industry regulator unwilling to rely on the global liquidity pool of each bank.The Australian Prudential Regulation Authority yesterday spelled out its latest thinking on how to rope in foreign banks to a modernised version of long running liquidity rules.An APRA discussion paper sets out proposals for the application of a liquid assets requirement for foreign bank branches that are now subject to a concessionary requirement under the "liquidity coverage ratio"."APRA is consulting on the merit of continuing the existing regime in comparison with a simple metric," Michael Cunningham, a KPMG partner, said.This simple metric would require foreign bank branches to hold specified liquid assets equal to at least nine per cent of external liabilities.APRA allowed in its discussion paper that managers of global banks could have great incentives to support branches during a period of distress, funding them from global liquidity pools.But this alternative, APRA said, "would potentially require APRA to place entire reliance on assets, staff and processes over which it has no oversight or jurisdiction, would not be prudent and may be difficult to support in the context of competitive neutrality. "In particular, it would expose foreign ADIs to risks that are essentially operational in nature, arising from factors such as time-zone and business day differences, market operating hours and currency convertibility risk. "Liquidity risk is idiosyncratic and it is not sufficient that liquid assets exist somewhere within a legal entity; liquidity needs to be available in a specific currency, form and location at a specific time."