Liquidity Coverage Ratio
a.k.a. LCR
A banking rule requiring banks to hold enough easy-to-sell assets to cover a month of heavy cash outflows…
In plain English
A banking rule requiring banks to hold enough easy-to-sell assets to cover a month of heavy cash outflows in a crisis.
The liquidity coverage ratio comes from the Basel III reforms after 2008. Banks must hold high-quality liquid assets at least equal to the cash they could lose over 30 stressed days.
It is meant to stop banks running dry in a panic like the one in 2008.
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