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CS Professional · Banking and Insurance - Laws and Practice · Risk Management in Banks and Basel Accords

Under Basel III, the Liquidity Coverage Ratio (LCR) of a bank is computed as:

LCR is the stock of high quality liquid assets divided by total net cash outflows over the next 30 calendar days under stress. The other formulas describe the NSFR, leverage ratio and a simple deposit-loan ratio.

  1. AStock of high quality liquid assets divided by total net cash outflows over the next 30 calendar daysCorrect
  2. BAvailable stable funding divided by required stable funding over one year
  3. CTier 1 capital divided by total exposure measure
  4. DTotal deposits divided by total loans and advances

Explanation

LCR = stock of HQLA / total net cash outflows over a 30-day stress period, and must be at least 100%. The option based on available and required stable funding describes the Net Stable Funding Ratio. Tier 1 over exposure is the leverage ratio.

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