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Jul 11, 2024 · A new working paper she coauthored that was published by the Bank’s Supervisory Research and Analysis group explores how a “shock” to one bank’s liquidity can ripple across a network of firms – especially in times of crisis, such as the COVID-19 pandemic.
Examples of liquid assets generally include central bank reserves and government bonds. To remain viable and avoid insolvency, a bank needs to have enough liquid assets to meet withdrawals by depositors and other obligations that fall due in the near term.
The fundamental role of banks typically involves the transfor-mation of liquid deposit liabilities into illiquid assets such as loans; this makes banks inherently vulnerable to liquidity risk. Liquidity-risk management seeks to ensure a bank’s ability to continue to perform this fundamental role.
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Jul 12, 2019 · In particular, beginning in 2015, large banks in the United States have needed to comply with the liquidity coverage ratio (LCR) by holding sufficient "high-quality liquid assets" (HQLA), a requirement that has induced significant changes to banks' balance sheet management.
Dec 15, 2019 · 30.1. The numerator of the Liquidity Coverage Ratio (LCR) is the "stock of high-quality liquid assets (HQLA)". Under the standard, banks must hold a stock of unencumbered HQLA to cover the total net cash outflows (as defined in LCR40) over a 30-day period under the stress scenario prescribed in LCR20. In order to qualify as HQLA, assets should ...
Jun 27, 2024 · It also outlines policies when institutions are required to have more liquid assets are required, such as (1) recent trends show substantial reductions in large liability accounts, (2) the...
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In order to mitigate cliff effects that could arise, if an eligible liquid asset became ineligible (e.g. due to rating downgrade), an institution is permitted to keep such assets in its stock of liquid assets for an additional 30 calendar days.
