Banks should also maintain high quality, liquid assets adequate to survive 30 days of "acute short-term stress," it said.
Assets eligible as level 1 high quality liquid assets ("HQLA"), such as sovereign bonds, are subject to a 0% required stable funding ("RSF") factor, unlike the 5% assigned by the BCBS NSFR standard.
Under Basel III, banks need to have more high quality liquid assets than projected cash outflows over 30 days in a significant stress scenario (specified by supervisors), i.e. a ratio greater than one.
Mark Carney, the Bank of England governor, also made clear in his emergency statement on Friday that banks were now more resilient, having raised more than £130bn of capital, and more than £600bn of high-quality liquid assets.
Which is that they define cash, central bank reserves and some marketable securities backed by sovereigns and central banks as the highest quality liquid assets.
The current classification of securities held by banks does not allow U.S. Municipal Securities to be included as a part of high-quality liquid assets.
Regulators require big banks to hold especially high amounts of liquid assets against uninsured deposits.
Regulators are quick to point to banks' higher buffers of "liquid" assets to fight runs on deposit and debt-rollover problems.
"The decrease has been driven by increased market funding costs and the costs of holding higher levels of liquid assets as a result of new regulatory requirements," the bank said.
Since banks will always make mistakes, Roubini argues, they should be required to retain more capital and maintain higher levels of liquid assets (cash and securities that can be sold quickly).
Merrill still has the highest exposure to leveraged loans of its Wall Street peers, with $33 billion, and the highest percentage of less liquid assets to total assets, 32%, according to research by Sanford Bernstein.
