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.  
  
It applies throughout the European Union.
 
  
The LCR has been implemented in stages from 2015, to reach the 100% requirement by January 2019.
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The LCR is calculated as:
  
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LCR = HQLAs / Net cash outflows
  
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.
 
  
 
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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 +
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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.
  
  
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* [[Basel III]]
 
* [[Basel III]]
 
* [[European Union]]
 
* [[European Union]]
* [[Net stable funding ratio]]
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* [[Net Stable Funding Ratio]]
 
* [[Cash investing in a new world]]
 
* [[Cash investing in a new world]]
 
* [[HQLA]]
 
* [[HQLA]]
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* [[Liquidity buffer]]
 
* [[Liquidity buffer]]
 
* [[Liquidity risk]]
 
* [[Liquidity risk]]
* [[LR]]
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* [[Overall Liquidity Adequacy Rule]]
* [[OLAR]]
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* [[Pillar 1]]
 
* [[Pillar 1]]
 
* [[Required Stable Funding]]
 
* [[Required Stable Funding]]
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* [[Stress]]
 
* [[Survival period]]
 
* [[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