What is Liquidity Coverage Ratio (LCR)?

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The Liquidity Coverage Ratio (LCR) is a key component of the Basel III regulatory framework that requires banks to hold a sufficient stock of unencumbered High-Quality Liquid Assets (HQLA) to cover their net cash outflows over a prospective 30-calendar-day severe stress scenario. This ratio, which must be maintained at a minimum of 100% since its full implementation in 2019, is designed to promote the short-term resilience of the global banking sector's liquidity risk profile.

Liquidity Coverage Ratio (LCR)

What is Liquidity Coverage Ratio (LCR)?

How is the Liquidity Coverage Ratio (LCR) calculated, and what are the specific criteria for High-Quality Liquid Assets (HQLA)?

Why did the Basel Committee introduce the LCR, and how did its phase-in from 2015 to 2019 impact global bank liquidity?

What are the key differences in LCR implementation and reporting requirements across major jurisdictions like the US, EU, and UK?

How do financial institutions strategically manage their LCR, and what are the regulatory consequences of falling below the 100% minimum requirement?

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