Commonwealth Bank chief executive Ralph Norris said he expected that the bank's minimum requirement for liquid assets would double if the Australian Prudential Regulation Authority implements proposed new liquidity risk management rules as they are currently drafted.In its September quarter update, released yesterday, Commonwealth reported that it has $87 billion of liquid assets. Of that amount $38 billion is the minimum prudential requirement, $12 billion is surplus liquids and $37 billion is residential mortgage backed securities (which are eligible for repurchase with the Reserve Bank).Norris said the bank would maintain its conservative settings until APRA finalises its changes in the middle of next year. The bank is also concerned that, while the bad debt cycle appears to have peaked, some sectors are still stressed.Norris did not comment on APRA's proposals at the bank's briefing yesterday but over the past couple of weeks his counterparts have been arguing that a heavy-handed approach by APRA would slow economic growth.Commonwealth reported unaudited cash earnings of $1.4 billion for the September 2009 quarter. Among the highlights was growth above system in home lending, record trading volume at CommSec and a recovery in the wealth management division, with an eight per cent increase in funds under administration.Impairment expenses in the quarter were about $700 million. Impairment expenses were $1.3 billion in the June half.Impaired assets rose from 86 basis points of gross loans and acceptances at June 30 to 88 basis points ($4.4 billion). In the September quarter new impaired assets represented only 14 basis points of the total, compared to 51 basis points in the June half. Norris said: "Bad debts have peaked."The outlook for the rest of the year will be affected by slowing demand for credit in the commercial bank, a decline in institutional markets and trading activity, and fairly flat margins.