What is the Liquidity Coverage Ratio LCR?

April 09, 2025 04:47 PM PDT | By Team Kalkine Media

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The LCR is a critical measure for ensuring short-term solvency in times of crisis. By requiring banks to maintain a buffer of highly liquid assets, it minimizes systemic risk and promotes confidence in the financial system, though it may impose some trade-offs on economic expansion and lending flexibility. Description: How do banks survive sudden financial shocks? Enter the Liquidity Coverage Ratio (LCR)—a key regulation that ensures banks hold enough high-quality liquid assets to stay afloat during crisis periods. In this video, we unpack the essentials of LCR, its formula, purpose, and impact on the banking sector.

What you'll learn: • What is LCR and how it's calculated

• Why a 30-day stress test matters in banking

• What qualifies as High-Quality Liquid Assets (HQLA)

• The real-world implications for banks and the economy

• Key challenges and limitations of the LCR Whether you're a finance student, investor, or just curious about banking regulation, this is your crash course in financial resilience.

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