A Basel III ratio requiring enough high-quality liquid assets to cover net cash outflows over a 30-day stress. It must be at least 100%.
Where you will meet it
Liquidity coverage ratio comes up in 7 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“Two liquidity standards were added as well, a 30-day liquidity coverage ratio and a net stable funding ratio, both with a 100% minimum.”
The Governance of Risk Management FRM Part I · Foundations of risk management
“Basel III raised the quality and quantity of capital and added a leverage ratio, the liquidity coverage ratio and the net stable funding ratio.”
Liquidity Risk FRM Part II · Liquidity and treasury risk measurement and management
“The Liquidity Coverage Ratio compares the stock of unencumbered high-quality liquid assets (HQLA) with net cash outflows over a 30-day stress period, using the regulatory definitions, eligibility criteria, haircuts and inflow caps.”
Solvency, Liquidity, and Other Regulation After the Global Financial Crisis FRM Part II · Operational risk and resilience
“The liquidity coverage ratio (LCR) compares high-quality liquid assets (HQLA) with net cash outflows over a 30-day stress period, using the regulatory definitions, eligibility criteria, haircuts and inflow caps.”
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