Debit balance and Liquidity Coverage Ratio: Difference between pages

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1. ''Financial accounting''.
''Bank regulation''


In financial accounting a debit balance is an asset within the balance sheet, or an expense within the profit and loss account (or income statement).
(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.


:<span style="color:#4B0082">'''Debit balance miscommunication'''</span>
It applies throughout the European Union.


:A common miscommunication between the functions of accounting and treasury is the different use of debits and credits. Accountants/controllers are used to posting journal entries where from a balance sheet perspective a debit signifies an increase in value, and a credit a reduction in value. However, for treasury staff a credit is an increase in value, and a debit a reduction. This simple difference is often cause for some awkward conversations between both professions.
The LCR has been implemented in stages from 2015, to reach the 100% requirement by January 2019.  


:''The Group Treasurer, An ACT guide to the first 100 days, Page 9.''


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.
2. ''Banking''.
 
In banking a debit balance - in the bank's records - is one which stands in favour of the bank. 
 
The customer owes money to the bank. 
 
Also known as an overdrawn balance. 
 
(Contrasted with a credit, or positive, balance in the bank's records.  Being a balance standing in favour of the customer.)




== See also ==
== See also ==
* [[Assets]]
* [[Basel III]]
* [[Balance]]
* [[European Union]]
* [[Balance sheet]]
* [[Net Stable Funding Ratio]]
* [[Credit balance]]
* [[Cash investing in a new world]]
* [[Debit]]
* [[HQLA]]
* [[Income statement]]
* [[Level 1 liquid assets]]
* [[Overdraft]]
* [[Level 2 liquid assets]]
* [[Overdrawn]]
* [[Leverage Ratio]]
* [[Profit and Loss account]]
* [[Liquidity buffer]]
* [[Liquidity risk]]
* [[LR]]
* [[OLAR]]
* [[Pillar 1]]
* [[Required Stable Funding]]
* [[Survival period]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Compliance_and_audit]]
[[Category:Liquidity_management]]

Revision as of 11:58, 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 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.


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.


See also

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