What is the LCR rule?

​The U.S. LCR rule is finalized and requires banks to maintain minimum amounts of liquid assets to withstand cash outflows over a 30-day horizon, calculated as per prescribed methodology.

What is a good LCR ratio?

Banks and financial institutions should attempt to achieve a liquidity coverage ratio of 3% or more. In most cases, banks will maintain a higher level of capital to give themselves more of a financial cushion.

What qualifies as HQLA?

High Quality Liquid Assets (HQLA means liquid assets that can be readily sold or immediately converted into cash at little or no loss of value or used as collateral to obtain funds in a range of stress scenarios.

Who does the LCR apply to?

The LCR rule generally applies to a bank holding company, savings and loan holding company, or depository institution if: (1) It has total consolidated assets equal to $250 billion or more; (2) it has total consolidated on-balance sheet foreign exposure equal to $10 billion or more; or (3) it is a depository …

What is LCR reporting?

Liquidity Coverage Ratio (LCR) Reporting. Financial institutions are regulated to maintain specific liquidity ratios to meet their liquidity needs under systemic stress environment extending up to 30 calendar days. The minimum LCR requirement specified by Basel III varies from 60% in 2015 to 100% in 2019.

What does a high LCR mean?

They are required to maintain a 100% LCR, which means holding an amount of highly liquid assets that are equal or greater than its net cash flow, over a 30-day stress period.

Are Government bonds HQLA?

HQLA refers to high quality liquid assets, which are three things: (1) cash on deposit at the RBA; (2) Commonwealth government bonds; and (3) State government bonds.

What is HQLA Basel?

One of the key reforms introduced by Basel III, the Liquidity Coverage Ratio (LCR), requires banks to hold an adequate amount of unencumbered High-Quality Liquid Assets (HQLA) that can be converted easily and immediately into cash in private markets.