Difference between revisions of "Liquidity Coverage Ratio"

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* [[Liquidity buffer]]
 
* [[Liquidity buffer]]
 
* [[Liquidity risk]]
 
* [[Liquidity risk]]
* [[OLAR]]
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* [[Overall Liquidity Adequacy Rule]]
 
* [[Pillar 1]]
 
* [[Pillar 1]]
 
* [[Required Stable Funding]]
 
* [[Required Stable Funding]]

Revision as of 12:35, 17 November 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 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.

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


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