Liquidity Coverage Ratio: Difference between revisions
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* [[Level 2 liquid assets]] | * [[Level 2 liquid assets]] | ||
* [[Leverage Ratio]] | * [[Leverage Ratio]] | ||
* [[Liquidity]] | |||
* [[Liquidity buffer]] | * [[Liquidity buffer]] | ||
* [[Liquidity risk]] | * [[Liquidity risk]] | ||
Latest revision as of 20:52, 4 July 2022
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 stressed net cash requirements over 30 days.
The LCR is calculated as:
LCR = HQLAs / Net cash outflows
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.
The LCR applies throughout the European Union.
It reduces the value to a bank of cash deposits 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.
See also
- Basel III
- Cash investing in a new world
- European Union
- High Quality Liquid Assets (HQLAs)
- Level 1 liquid assets
- Level 2 liquid assets
- Leverage Ratio
- Liquidity
- Liquidity buffer
- Liquidity risk
- Net Stable Funding Ratio (NSFR)
- Overall Liquidity Adequacy Rule (OLAR)
- Pillar 1
- Required Stable Funding
- Stress
- Survival period
