What is Liquidity Coverage Ratio (LCR)?

In this video, Professor Moorad Choudhry explains the Liquidity Coverage Ratio (LCR), a core component of the Basel III liquidity risk framework. He outlines why the Basel Committee on Banking Supervision introduced the LCR after the global financial crisis, and how it provides a global minimum standard for managing liquidity risk across the banking sector. The session covers what the LCR measures, how high-quality liquid assets (HQLA) are defined, how stressed 30-day outflows are calculated, and why maintaining an LCR above 100% is essential for bank safety and regulatory compliance. Professor Choudhry also shares his own perspective on short-term liquidity metrics, including his proposed “liquid cash ratio,” which focuses on immediate cash resources over a shorter horizon. 🔔 Subscribe for more expert insights on banking, liquidity risk, and financial markets. Recommended Reading: The Principles of Banking (2nd Edition) 📘 https://amzn.to/3l224LE Wikipedia: https://en.wikipedia.org/wiki/The_Pri...