Briefing

Understanding the New Liquidity Coverage Ratio Requirements


Abstract: In 2014, U.S. financial regulators introduced new liquidity coverage ratio requirements for qualified banking institutions. This regulation, based on guidelines from the Basel III accord, requires that banks hold minimum levels of liquid assets to withstand a period of financial stress. It is a response to the financial crisis of 2007?08, during which many banks found themselves suddenly cut off from short-term funding. But the impact of liquidity requirements remains an area of ongoing debate and economic research.

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Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2016

Issue: Jan