15 Bank for International Settlements Basel III Liquidity Ratio Calculation

Various parameters in Liquidity Risk Management help in analyzing the liquidity status of the bank. Liquidity ratios are one such parameter prescribed in the Basel III Guidelines. There are two types of ratios which are calculated by the application as follows:

• Liquidity Coverage Ratio: Liquidity coverage ratio addresses the short-term liquidity needs of an institution during a stress 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). Liquidity coverage ratio is calculated at the legal entity level, on a standalone and consolidated basis.
• Net Stable Funding Ratio: This addresses the medium and long-term liquidity needs of a bank during a stress situation. It specifies the minimum amount of stable funding required to be maintained in order to promote stable long term funding.