Morgan Stanley won’t sacrifice its $181bn pool of cash, government debt and other liquid assets to meet proposed U.S. rules on how much capital it holds against total assets, Chief Financial Officer Ruth Porat said.
Bloomberg News reports that risk management tied to liquidity is 'sacrosanct' and won’t be compromised to boost the firm’s holding-company leverage ratio, which at 4.2% trails the proposed 5% minimum, Porat said Friday on a conference call with fixed-income investors. Morgan Stanley has plans to meet the leverage requirement by 2015, ahead of the proposed deadline of 2018, she said.
Morgan Stanley executives were questioned about balancing liquidity and leverage after European banks including Barclays said this week they will cut their pools of cash and other highly liquid assets to meet regulatory requirements for leverage ratios, which measure capital to total assets. Morgan Stanley’s liquidity coverage ratio was more than 125%, topping the minimum of 100%.
'We’re not to going to violate our core liquidity risk-management principles', Porat, 55, said. 'We’re running with a strong liquidity reserve. We think that’s a prudent thing to do'.
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