Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools¶
Basel Committee on Banking Supervision. (2013). Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools.
Cited by¶
3 citations across 3 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Maturity Mismatch
- Banking developed the conceptual machinery — liquidity coverage ratio, net stable funding ratio, liquidity stress test, lender of last resort — to manage maturity mismatch, and the structural understanding transplants: supply-chain practice imported it as safety stock, supplier diversification, and just-in-case versus just-in-time; workforce planning imported it as training-pipeline lead times and contingent-workforce reserves; conservation biology imported it as life-history risk and minimum-viable-population analysis tuned to generation time; and energy systems import it as capacity versus flexibility.
This sourceDefines the Liquidity Coverage Ratio sizing a high-quality-liquid-asset buffer against a worst-case 30-day stressed net-outflow scenario rather than average funding need.
Supported in partVerified against the work's full text
Defines the LCR's 30-day stressed-outflow HQLA buffer, backing the banking half of the claim only; the four cross-domain transplant clauses are absent.
“The LCR promotes the short-term resilience of a bank's liquidity risk profile. It does this by ensuring that a bank has an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash easily and immediately in private markets to meet its liquidity needs for a 30 calendar day liquidity stress scenario.”
- Banking developed the conceptual machinery — liquidity coverage ratio, net stable funding ratio, liquidity stress test, lender of last resort — to manage maturity mismatch, and the structural understanding transplants: supply-chain practice imported it as safety stock, supplier diversification, and just-in-case versus just-in-time; workforce planning imported it as training-pipeline lead times and contingent-workforce reserves; conservation biology imported it as life-history risk and minimum-viable-population analysis tuned to generation time; and energy systems import it as capacity versus flexibility.
Mechanisms¶
- Liquidity Coverage Floor Metric
- It is the logic of the Liquidity Coverage Ratio, which requires high-quality liquid assets to cover modeled net outflows over a thirty-day stress.
This sourceBCBS 238. Bank for International Settlements (2013). Defines the Liquidity Coverage Ratio as a stock of unencumbered high-quality liquid assets sufficient to meet net cash outflows over a 30-day stress scenario.
- It is the logic of the Liquidity Coverage Ratio, which requires high-quality liquid assets to cover modeled net outflows over a thirty-day stress.
- Liquidity Reserve
- The discipline is to test the pool against a genuine adverse scenario, hold enough of it as unencumbered cash that no counterparty can withdraw, and treat the coverage ratio as a live risk signal rather than a quarter-end formality.
This sourceCalls for testing liquidity against an adverse scenario, holding an unencumbered cash buffer, and treating the coverage ratio as a live risk signal.
- The discipline is to test the pool against a genuine adverse scenario, hold enough of it as unencumbered cash that no counterparty can withdraw, and treat the coverage ratio as a live risk signal rather than a quarter-end formality.
Verification¶
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