Deferred tax and Liquidity Coverage Ratio: Difference between pages

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''Accounting.''
''Bank regulation''.
An accounting concept that arises to match the income and expenditure in a set of financial accounts with their related tax effects, by comparing for example the net book value of fixed assets and their respective Tax written down values.


Deferred tax relates to the estimated future tax consequences of transactions and events that have been entered into at the balance sheet date. Deferred tax relates to the difference between the 'accounting' and 'tax' balance sheets.
(LCR).
 
The LCR is a requirement under Basel III for a bank to hold high-quality liquid assets (HQLAs) sufficient to cover 100% of its net cash requirements over 30 days.
 
This requirement has been implemented in stages from January 2015, to reach the 100% requirement by January 2019.
 
 
It reduces the value to a bank of cash deposit of less than 30 days tenor because they are only worth the income on the HQLAs if a bank forecasts no short term cash receipts to cover repayment.  
 
The purpose of this requirement is to ensure that banks can manage stressed market conditions, under which the bank is assumed to suffer substantial outflows of the cash previously deposited with it.


A simple example of a deferred tax asset is a tax loss eligible for carry forward to shelter expected future taxable profits. In this case the expected future tax saving would be an asset/benefit recognised in the current balance sheet.


== See also ==
== See also ==
* [[Tax written down value]]
* [[Basel III]]
* [[Net stable funding ratio]]
* [[Cash investing in a new world]]
* [[Leverage ratio]]
* [[Liquidity buffer]]
* [[Liquidity risk]]
* [[LR]]
* [[OLAR]]
* [[Survival period]]


[[Category:Compliance_and_audit]]
[[Category:Liquidity_management]]

Revision as of 15:59, 13 August 2016

Bank regulation.

(LCR).

The LCR is a requirement under Basel III for a bank to hold high-quality liquid assets (HQLAs) sufficient to cover 100% of its net cash requirements over 30 days.

This requirement has been implemented in stages from January 2015, to reach the 100% requirement by January 2019.


It reduces the value to a bank of cash deposit of less than 30 days tenor because they are only worth the income on the HQLAs if a bank forecasts no short term cash receipts to cover repayment.

The purpose of this requirement is to ensure that banks can manage stressed market conditions, under which the bank is assumed to suffer substantial outflows of the cash previously deposited with it.


See also

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