Difference between revisions of "Liquidity Coverage Ratio"

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(Explain purpose of regulation. Source: The Treasurer, April 2015 p35.)
(Remove reference to phase-in period.)
 
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''Bank regulation''.
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''Bank regulation''
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(LCR).
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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.
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The LCR is calculated as:
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LCR = HQLAs / Net cash outflows
  
A requirement under Basel III for banks to hold appropriate levels of high-quality liquid assets (HQLAs), generally at significantly higher levels than required under earlier regulations.
 
  
 
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 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.
  
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The LCR applies throughout the European Union.
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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 ==
 
== See also ==
 
* [[Basel III]]
 
* [[Basel III]]
* [[NSFR]]
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* [[European Union]]
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* [[Net Stable Funding Ratio]]
 
* [[Cash investing in a new world]]
 
* [[Cash investing in a new world]]
* [[Leverage ratio]]
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* [[HQLA]]
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* [[Level 1 liquid assets]]
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* [[Level 2 liquid assets]]
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* [[Leverage Ratio]]
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* [[Liquidity buffer]]
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* [[Liquidity risk]]
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* [[Overall Liquidity Adequacy Rule]]
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* [[Pillar 1]]
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* [[Required Stable Funding]]
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* [[Stress]]
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* [[Survival period]]
  
 
[[Category:Compliance_and_audit]]
 
[[Category:Compliance_and_audit]]
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[[Category:Liquidity_management]]

Latest revision as of 16:47, 29 January 2020

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