1. What is the Liquidity Coverage Ratio?

The Liquidity Coverage Ratio (LCR) is a financial metric that measures a bank's ability to meet its short-term obligations under stress scenarios. It compares a bank's high-quality liquid assets (HQLA) to its total net cash outflows over a 30-day stress period.

2. How Does the Calculator Work?

The calculator uses the LCR formula:

Where:

• \( HQLA \) — High Quality Liquid Assets (currency)
• \( Net\ Cash\ Outflows \) — Total expected cash outflows minus inflows (currency)

Explanation: The ratio shows what percentage of net cash outflows can be covered by liquid assets. Regulatory minimum is typically 100%.

3. Importance of LCR Calculation

Details: LCR is a key Basel III liquidity requirement that ensures banks maintain sufficient liquidity to survive short-term liquidity disruptions.

4. Using the Calculator

Tips: Enter HQLA and net cash outflows in the same currency. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What qualifies as HQLA?
A: HQLA includes cash, central bank reserves, and marketable securities that can be easily converted to cash with minimal loss.

Q2: What is the regulatory minimum LCR?
A: Basel III requires a minimum LCR of 100% for internationally active banks.

Q3: How is net cash outflow calculated?
A: It's total expected cash outflows minus total expected cash inflows (subject to regulatory caps).

Q4: What time period does LCR cover?
A: LCR measures liquidity over a 30-day stress period as defined by regulators.

Q5: How often should LCR be calculated?
A: Banks typically calculate LCR daily for regulatory reporting purposes.