Liquidity Coverage Ratio (LCR) Calculator
From high-quality liquid assets and 30-day net cash outflows, compute a bank's liquidity coverage ratio.
Input Data
Results
At a glance:The LCR measures a bank's short-term liquidity resilience under a stress scenario — whether HQLA alone can cover 30 days of net cash outflows: LCR = HQLA ÷ 30-day net cash outflows × 100%. HQLA: cash, central-bank reserves, certain government bonds — very safe and readily realisable. Net cash outflows = expected outflows − expected inflows (with regulatory caps). The Basel III global minimum is 100%. Higher is safer; below 100% signals a liquidity gap needing funding. It is a core banking-supervision indicator (HKMA applies it in HK).
Formula
LCR = HQLA ÷ net cash outflows (30 days) × 100%.
Net cash outflows = expected outflows − min(expected inflows, cap).
$$LCR = \dfrac{\text{HQLA}}{\text{Net Cash Outflow}_{30d}} \times 100\%$$$$\geq 100\%\ \text{(Basel III minimum)}$$How to Use
- Enter the bank's high-quality liquid assets.
- Enter the 30-day net cash outflows (outflows − inflows).
- View the LCR (should be ≥ 100%).
LCR at various HQLA and 30-day net outflows (HK$ millions)
| HQLA | Net outflow | LCR | Assessment |
|---|---|---|---|
| 120 | 100 | 120% | Exceeds minimum, ample |
| 100 | 100 | 100% | Meets minimum exactly |
| 90 | 100 | 90% | Below minimum, gap |
| 150 | 100 | 150% | Strong buffer |
Case Studies
Case 1: Liquidity resilience of a mid-sized bank
Bank A holds HQLA HK$120m; stress-scenario 30-day net cash outflows HK$100m.
LCR = 120 ÷ 100 × 100% = 120%. Above the 100% minimum, with a 20% buffer.
Interpretation: even if outflows spike, A can cover 30 days on HQLA alone — strong resilience. Prudential supervisors prefer banks well above 100% to absorb shocks.
Case 2: Liquidity gap when below 100%
Bank B holds HQLA HK$90m but net outflows HK$100m (deposit flight + committed lines).
LCR = 90 ÷ 100 × 100% = 90% — below the 100% minimum, a ~HK$10m liquidity gap.
Interpretation: in stress, B cannot fully cover 30 days on HQLA, needing urgent funding (central-bank facilities, asset sales, interbank). This is exactly what LCR flags. Avoid the gap by holding more HQLA or managing outflows (e.g. stable deposits).
FAQ
What is the LCR and why must it be at least 100%?
The LCR (Liquidity Coverage Ratio) ensures a bank holds enough high-quality liquid assets to survive 30 days of stressed net cash outflows. ≥100% means HQLA ≥ 30-day outflows. It comes from the 2008 crisis lesson: many banks were illiquid despite being solvent. The Basel III global minimum is 100%; HKMA applies it in HK (with disclosure). Below 100% means a liquidity gap needing funding.
What counts as high-quality liquid assets (HQLA)?
HQLA are very safe, low-risk, readily realisable assets: cash, central-bank reserves, certain high-grade government/central-bank bonds. Divided into Level 1 (no haircut, no cap — e.g. cash, sovereign bonds) and Level 2 (with haircut and capped share) under Basel rules. This calculator takes the total HQLA, but actual classification and haircuts follow the rules.
What are 30-day net cash outflows?
Under a stress scenario, expected cash outflows minus expected inflows over 30 days, with regulatory caps on inflows (you cannot count all inflows). It reflects deposit flight, drawn committed lines, collateral calls, etc. The LCR divides HQLA by this figure.
Does LCR differ from the NSFR?
Yes. LCR is short-term (can you survive 30 days of stress) — a survival test. NSFR (Net Stable Funding Ratio) is long-term (is stable funding enough for the asset maturity profile over a year) — a structural test. The two complement: LCR for short-run liquidity shocks, NSFR for long-run funding stability. Both are Basel III core liquidity rules (HKMA applies them). Pair with the NSFR calculator.
How does the LCR matter to ordinary depositors?
Indirect but real. The LCR is a prudential 'safety cushion' ensuring banks keep enough liquid assets to meet withdrawals even in stress, reducing the chance of a freeze or run. A well-above-100% LCR means the bank is far more likely to pay you on demand and protect deposits even in turmoil. So when choosing a bank, note its disclosed LCR/NSFR (big banks publish them); a chronically low or falling LCR is a liquidity warning. Also, a high LCR can slightly lower a bank's profit (holding more low-yield liquid assets), but for depositors safety > yield. This calculator is a teaching model; actual figures use the regulator's prescribed coefficients and the latest disclosures.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.