The renovation of APRA's prudential rules in light of the credit shock continues, with the banking regulator publishing a consultation paper on liquidity management on Friday.There are three main themes. One is to narrow the effective definition of liquid assets to government, or sovereign liabilities.The second is to allow for a qualified definition of liquid assets - and a wider definition this time - that essentially follows that used by the Reserve Bank of Australia in working out what securities it will accept in market operations.The third is to spell out the cash flow projections, scenario planning and stress testing banks must undertake, and which in some cases will look further forward, and consider more feedback effects, than banks perhaps planned for in the past.On the definition of liquids APRA reminded banks that "liquid assets should be high quality assets that can be readily sold or used as collateral in private markets, even when those markets may be under stress."In practice, these should be "eligible central bank collateral for normal market operations" and "unencumbered and specifically held in a segregated pool of liquid assets for the sole purpose of providing a liquidity buffer."APRA said that in most currencies only sovereign bonds meet these criteria, but also asked the industry for feedback on other securities that might qualify.One twist is that APRA is making it clear to banks that bundles of their own mortgages - and which have been "internally securitised" over the last year in the tens of billions of dollars to use if needed in RBA dealings - won't really count as liquid assets, or at least not until the third month of modelling a stress test.APRA will apply the new rules to foreign bank branches as well as foreign subsidiary banks.The revised approach proposed by APRA won't apply to small credit unions, for which the current approach will apply.