Various parameters in Liquidity Risk Management help in analyzing the liquidity status of the bank. Liquidity ratios are one such parameter prescribed by the Basel III Guidelines. Oracle Financial Services Liquidity Risk Regulatory Calculations for Monetary Authority of Singapore (LRRCMAS) application calculates the following types of ratios:
Topics:
· Liquidity Coverage Ratio (LCR)
· Net Stable Funding Ratio (NSFR)
· Minimum Liquid Assets Ratio (MLA)
The Liquidity Coverage Ratio (LCR) addresses the short-term liquidity requirements of a bank or financial institution during a stressful situation. It estimates whether the stock of high-quality liquid assets is sufficient to cover the net cash outflows under stress situations over a specified future period, in general, lasting 30 calendar days (or LCR horizon). LCR is calculated at the legal entity level, on a standalone and consolidated basis.
The Net Stable Funding Ratio (NSFR) addresses the medium and long-term liquidity requirements of a bank, or financial institution during a stressful situation. It specifies the minimum amount of stable funding required to be maintained to promote stable long-term funding.
The Minimum Liquid Asset (MLA) addresses the liquidity requirements of a bank or financial institution that is neither headquartered in Singapore nor is domestic systematically important banks.