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Learn With ETMarkets: Remember Silicon Valley Bank? Here’s why you should know about Liquidity Coverage Ratio (LCR)
Learn With ETMarkets: Remember Silicon Valley Bank? Here’s why you should know about Liquidity Coverage Ratio (LCR)
The Liquidity Coverage Ratio (LCR) is one of the key ways to analyze a bank's liquidity and to ensure its ability to withstand unforeseen situations by holding sufficient liquidity. It is calculated by dividing a bank's high-quality liquid assets by its total net cash outflows, and it reflects the sufficiency of assets a bank has to handle unexpected situations. The LCR ensures that a bank has the necessary cash to meet cash outflows over a 30-day period, allowing for the bank's customers' protection while maintaining stability. Moreover, banks and investors can access the LCR reports of banks quarterly, making it easier to evaluate their strength and resilience.
The Liquidity Coverage Ratio (LCR) is one of the key ways to analyze a bank's liquidity and to ensure its ability to withstand unforeseen situations by holding sufficient liquidity. It is calculated by dividing a bank's high-quality liquid assets by its total net cash outflows, and it reflects the sufficiency of assets a bank has to handle unexpected situations. The LCR ensures that a bank has the necessary cash to meet cash outflows over a 30-day period, allowing for the bank's customers' protection while maintaining stability. Moreover, banks and investors can access the LCR reports of banks quarterly, making it easier to evaluate their strength and resilience.