Global regulators have given banks four more years and greater flexibility to build up cash buffers so they can use some of their reserves to help struggling economies grow.
The pull-back from a draconian earlier draft of new global bank liquidity rule to help prevent another financial crisis went further than banks had expected by allowing them a broader range of eligible assets.
Banks had complained they could not meet the January 2015 deadline to comply with the new rule on minimum holdings of easily sellable assets from the Basel Committee of banking supervisors and also supply credit to businesses and consumers.
The committee's oversight body agreed on Sunday to phase in the rule from 2015 over four years, and widen the range of assets banks can put in the buffer to include shares and retail mortgage-backed securities (RMBS), as well as lower rated company bonds.
The new, less liquid assets can only be included at a hefty discount to their value, but the changes are a significant move from the draft version of the rule unveiled two years ago.
The Basel Committee, drawn from nearly 30 countries representing nearly all the world's markets, hopes they will stop banks from shrinking loan books to comply with the rule.
"For the first time in regulatory history, we have a truly global minimum standard for bank liquidity," the oversight body's chairman Mervyn King told a news conference in Basel, Switzerland.
"Importantly, introducing a phased timetable for the introduction of the liquidity coverage ratio ... will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery," said King, who is also Bank of England governor.
Sunday's amendments, endorsed unanimously, came after two years of haggling among Basel Committee members.
They surprised relieved bankers with their scope and will help kick-start the mortgage backed securities market, languishing after being tarnished by the US subprime crisis which set off the 2007-09 financial crisis.
"The inclusion of good quality RMBS in the liquidity buffer is a very welcome twelfth night present," said Simon Hills, executive director of the British Bankers' Association.
"It will make a real difference to issuance volumes by improving their marketability so that banks are better able to manage their balance sheets and provide funding to the real economy," Hills said.
The rule requires banks to hold enough liquid assets like government and corporate bonds to cover net outflows for up to a month to avoid taxpayers having to bail them out.
Basel Committee chairman Stefan Ingves, who also heads Sweden's central bank, said Sunday's changes mean that the average buffer at the world's top 200 banks rises from 105 to 125 percent, meaning it is well above full compliance.
But many banks elsewhere are well below full compliance, especially in some euro zone countries, and they will have to find an estimated trillion euros of assets over coming years at a time when bank profitability is being hammered.
Furthermore, liquidity held by some banks is on loan from their central bank and will have to be returned at some point. A revived mortgage-backed securities would help wean lenders off central banks.
King said regulators want to be "crystal clear" that banks in countries undergoing stress like in the euro zone could draw down their buffers below minimum levels if the local supervisor agreed.
Jim Embersit, a former Federal Reserve official and Basel Committee member and now with Ernst & Young in Washington, said many banks would move to fully comply before 2019 given market pressures and the need to change business models.
"Firms will not be eager to jump to full 100 percent implementation quickly but would be expected to meet the required milestones on their own prior to the designated deadlines," Embersit said.
The Basel Committee also agreed to ease the "stress scenario" for calculating the amount of liquid assets banks must hold, meaning the buffer would be smaller.
Under the Basel regime, the rules would run alongside separate rules governing banks' capital, intended to ensure their longer-term stability.
Banks would start complying in 2015 when they are expected to hold at least 60 percent of the total buffer, building up to 100 per cent by January 2019, when Basel's separate, tougher bank capital requirements also must be met in full.
The liquidity rule is meant to avoid a repeat of the scenario in which a short-term funding freeze brought down lenders like Britain's Northern Rock early on in the 2007-09 financial crisis.
It is part of the Basel III bank capital and liquidity accord agreed by world leaders in 2010 and being phased in over six years from this month, though there are delays in the United States and European Union.
Ingves said the Basel Committee is still committed to enacting a third plank of Basel III, the net stable funding ratio to limit dependence on short-term funding, by the end of 2018.
The Basel Committee will study how the introduction of the liquidity rule affects the impact of central banks injecting liquidity into the economy in a bid to spur growth.