Liquidity Coverage Ratio

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Definition

Liquidity Coverage Ratio. (LCR) It is the ratio of current assets to current liabilities. It is an essential component of Basel III regulation.

LCR shows if a financial institution 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 a30-calendar-day liquidity stress scenario.