Template-Type: ReDIF-Book 1.0
Author-Name: Sebastian Doerr
Author-Name: Mathias Drehmann
Title: The liquidity coverage ratio a decade on: a stocktake of the literature
Abstract: In the decade since the implementation of the Liquidity Coverage Ratio (LCR), what have we learned about its design, effectiveness and impact? The LCR is a central pillar of the Basel III regulatory reforms and aims to ensure that banks hold sufficient high-quality liquid assets to withstand short-term funding stress. Theoretical work, which mostly features fire-sale externalities, concludes that the LCR can raise welfare by mandating banks to hold more liquid assets or rely less on fragile short-term funding. Empirical work suggests that the LCR strongly raises banks' high-quality liquid assets and somewhat reduces their reliance on short-term funding. However, it can crowd out lending and induce greater risk-taking. The survey concludes with a discussion of open questions about the LCR's effectiveness, design and interaction with central bank policies.
Creation-Date: 2026-01
Year: 2026
Month: January
File-URL: http://www.bis.org/publ/bppdf/bispap164.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: http://www.bis.org/publ/bppdf/bispap164.htm
File-Format: text/html
ISBN:  978-92-9259-920-1
Number: 164
Handle: RePEc:bis:bisbps:164