Standard · International body
Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools
The LCR aims for banks to withstand 30 days of liquidity stress with assets that convert to cash immediately.
- Organization
- Basel Committee on Banking Supervision (BCBS)
- Document date
- January 2013
- Type
- Standard
- Language
- English
- Scope
- International
- Length
- 75 pages
What it contains
The document presents one of the essential Basel III reforms for a more resilient banking sector: the liquidity coverage ratio (LCR), whose objective is to promote the short-term resilience of the liquidity risk profile. It requires banks to hold an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted easily and immediately into cash in private markets to meet their liquidity needs under a 30 calendar day stress scenario.
Part 1 develops the LCR: the objective and use of HQLA, the definition of the ratio (the stock of HQLA, with its characteristics, operational requirements, diversification and definition, against total net cash outflows, with their outflows and inflows), and application issues such as frequency of calculation and reporting, scope, differences between home and host requirements and currencies. Part 2 defines monitoring tools: contractual maturity mismatch, concentration of funding, available unencumbered assets, LCR by significant currency and market-related monitoring tools.
This January 2013 version introduced a phase-in: the LCR took effect on 1 January 2015 with a minimum of 60 %, rising in equal annual steps to 100 % on 1 January 2019. The document clarifies that in periods of stress it would be appropriate for banks to use their HQLA and fall below the minimum, and that supervisors will assess that situation. The standard is integrated into the consolidated Basel Framework.
Why it matters for risk management
It is the conceptual basis of regulatory liquidity management: what counts as a liquid asset, how outflows and inflows are estimated under stress and which complementary metrics are monitored. The parameters have had later adjustments integrated into the Basel Framework; check the current version.
The old link pointed to the Spanish translation, which is no longer available on the BIS website; the English version is linked. The Club had included a description of the January 2013 proposal.
Summary prepared by the Dominican Republic Risk Management Club from a reading of the original document, with the source verified on 7 October 2026. It does not replace reading the official text and is not advice.
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