Economics • Banking & FinanceHard
What does the term 'Liquidity Coverage Ratio (LCR)' under Basel III standards require banks to maintain?
A. A stock of high-quality liquid assets to survive a 30-day acute stress scenario✓ Correct Answer
B. Minimum capital adequacy ratio of 15% in tier-1 capital
C. Fixed cash reserves deposited directly with the central bank
D. Foreign currency reserves matching total short-term import bills
💡 Solution & Explanation
The Liquidity Coverage Ratio is a critical Basel III metric requiring banks to hold a sufficient stock of high-quality liquid assets to survive a 30-day acute stress scenario. It ensures that financial institutions possess enough cash buffers for sudden outflows.
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