Definition

Liquidity Coverage Ratio

Meaning ⎊ Requirement to hold enough liquid assets to cover potential outflows over a 30-day stress period, ensuring operational liquidity.
Greeks.liveApril 11, 2026

Liquidity Coverage Ratio

The Liquidity Coverage Ratio is a regulatory requirement that ensures financial institutions have enough high-quality liquid assets to survive a significant stress scenario lasting 30 days. It is designed to prevent liquidity crises where a firm cannot meet its immediate obligations.

In the crypto sector, this ratio is becoming a key metric for evaluating the safety of exchanges and custodians. By holding assets that can be easily sold without significant price impact, firms can meet sudden withdrawal demands.

This ratio forces institutions to balance their portfolios toward more liquid assets. It is a vital tool for maintaining confidence in the face of market volatility.

The goal is to ensure that even under stress, the institution remains functional and can honor its commitments to clients.

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Glossary

High-Quality Liquid Assets

Asset ⎊ High-Quality Liquid Assets (HQLA) within cryptocurrency, options, and derivatives contexts represent instruments readily convertible to cash with minimal market disruption, serving as crucial components for managing counterparty credit risk and meeting margin calls.