The bank regulator will make few changes to its earlier draft prudential rules for managing liquidity risk, with the industry being required to adopt the new liquidity coverage ratio from January 2015, and the net stable funding ratio from January 2018. The Australian Prudential Regulation Authority will stick to its view on what counts as "high quality" liquid assets, dashing hopes that some corporate bonds and mortgage-backed securities may qualify.However, APRA has adopted a less stringent scenario regarding the deposit outflows that banks must be prepared to face at a time of industry stress (see the following article).Globally, bank regulators first outlined the two liquidity measures four years ago, with the Australian Prudential Regulation Authority opting for a conservative version of the reforms.APRA said it would not allow any transitional arrangements, such as a phase in of the LCR, as mooted by the Basel Committee on Banking Supervision. This tougher timetable is consistent with APRA's "early adopter" approach to rules on bank capital.Paul Siviour, head of banking and capital markets for Ernst & Young, said of the APRA paper: "The first thing is there are no surprises in it. The timetable for the LCR and NSFR is unchanged.""What they have modified a little bit is some of the assumptions that will be applied to arrive at the run-off assumptions.''Siviour said this would "alter the level of high quality liquid assets banks will need to hold to cover a systemic stress scenario."Tony Burke, policy director of the Australian Bankers Association said there was "evidence they've considered industry submission in detail, even if they haven't necessarily gone all our way."They've gone some way, for example, changing the run of assumptions on non-financial corporates from 100 per cent down to 30 per cent."Burke said the ABA would "still like to talk about the treatment of deposits from self-managed superannuation funds.APRA said in a discussion paper released yesterday that "the Basel Committee has noted that the graduated approach was introduced '...in light of the considerable stress facing banking systems in some regions.' The Australian banking system is not facing these circumstances."APRA also said it was "cognisant of concerns, raised most recently by the International Monetary Fund in its 2012 Financial System Stability Assessment of Australia, that the continued reliance of Australian banks on offshore funding leaves them exposed to disruptions to funding markets."Foreign banks have failed in their efforts to persuade APRA to soften its liquidity rules on branches. APRA said it "will not extend the recognition of head office support to foreign-owned ADIs that operate in Australia under both a subsidiary and a branch banking authority." Foreign banks had hoped to rely on head office funding for the first 15 days in a crisis.Branches will still have to produce going concern reports.APRA said it was still thinking about disclosure requirements on liquidity, though some disclosures are likely to be mandated. The regulator said that, in its view, the banking in industry in Australia was "well placed to meet the LCR requirement in full