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Investments glossary

Liquidity Coverage Ratio – LCR


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Doctors pour drugs of which they know little, to cure diseases of which they know less, into patients of whom they know nothing.

— Moliere

The liquidity coverage ratio (LCR) refers to the proportion of highly liquid assets held by financial institutions, to ensure their ongoing ability to meet short-term obligations. This ratio is essentially a generic stress test that aims to anticipate market-wide shocks and make sure that financial institutions possess suitable capital preservation, to ride out any short-term liquidity disruptions, that may plague the market.

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