Difference between revisions of "Liquidity Coverage Ratio"

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''Bank regulation''.
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''Bank regulation''
  
 
(LCR).
 
(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.  
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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
  
This requirement has been implemented in a staged approach commencing in January 2015 to reach the 100% requirement by January 2019. It will reduce 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 revenue 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.
 
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]]
* [[Net stable funding ratio]]
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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]]
 
* [[Liquidity risk]]
 
* [[Liquidity risk]]
* [[LR]]
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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]]
 
[[Category:Liquidity_management]]
 
[[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