LCR Calculator - Liquidity Coverage Ratio
Enter your bank's High-Quality Liquid Assets (HQLA) across the three regulatory tiers and your 30-day stress outflows and inflows. The calculator applies Basel III haircuts, the Level 2 and Level 2B concentration caps, and the 75% inflow offset cap, then shows your LCR percentage and whether you meet the 100% minimum. The "Show your work" panel walks through every step of the calculation with your actual numbers.
What is the Liquidity Coverage Ratio?
The Liquidity Coverage Ratio (LCR) is a bank regulatory standard introduced under Basel III that requires banks to hold enough High-Quality Liquid Assets (HQLA) to survive a severe 30-day liquidity stress scenario. The formula is simple: LCR = HQLA / Net Cash Outflows, and the result must be at least 100%. HQLA are assets that can be converted into cash quickly with minimal loss of value in a market-stress event - think central bank reserves, government bonds, and highly rated corporate debt. Net cash outflows are what the bank expects to pay out over 30 stressed days after offsetting incoming cash flows. The ratio was phased in globally from 2015 and is fully enforced across G20 and many other jurisdictions.
HQLA tiers, haircuts, and concentration caps
Not all liquid assets count equally. Basel III divides HQLA into three tiers. Level 1 covers cash, central-bank reserves, and sovereign or central-bank securities with a 0% risk weight - these carry no haircut and no cap on their share of the buffer. Level 2A covers high-grade government and agency securities, qualifying covered bonds, and securities from multilateral development banks; a 15% haircut is applied. Level 2B covers qualifying corporate bonds rated between BB+ and BBB+, non-financial equities, and certain RMBS; a 50% haircut is applied. Two concentration caps then limit the buffer: Level 2A and Level 2B together cannot exceed 40% of total HQLA after haircuts (the "Level 2 cap"), and Level 2B alone cannot exceed 15% of total HQLA (the "Level 2B cap"). If either cap is breached, the excess is excluded from the buffer.
How outflows and inflows are calculated
Gross outflows are calculated by applying regulatory run-off rates to each funding category. Stable retail deposits (insured accounts of individuals with a stable relationship with the bank) run off at just 3% because they are very unlikely to be withdrawn en masse. Less-stable retail deposits, uninsured or held by less-committed customers, run off at 10%. Operational wholesale deposits - held for clearing, custody, or cash management - run off at 25% because a portion is genuinely needed regardless of the stress. Non-operational wholesale funding, with no relationship anchor, runs off at 40%. Secured funding (repo and similar) carries 0%, 15%, or 25% depending on the quality of the collateral posted. Expected cash inflows are then offset against gross outflows, but are capped at 75% of gross outflows. This inflow cap prevents a bank from claiming near-zero net outflows simply because it has large receivables.
What the 100% minimum means and how regulators use LCR
An LCR of exactly 100% means the bank has one dollar of HQLA for every dollar of net stressed outflow over 30 days - the regulatory floor. Most large internationally active banks target a buffer well above 100% to give themselves room for measurement uncertainty and intra-period variation. In practice, many G-SIBs (Global Systemically Important Banks) run LCRs of 130% to 160% or higher. If a bank falls below 100%, it must notify its supervisor and may be required to submit a remediation plan. The LCR is intended to complement the Net Stable Funding Ratio (NSFR), which addresses longer-term structural liquidity over a one-year horizon. Supervisors use both ratios alongside stress testing and detailed liquidity risk assessments.
Basel III outflow run-off rates by category
| Funding category | Basel III run-off rate | Rationale |
|---|---|---|
| Stable retail deposits (insured) | 3% | Very unlikely to flee in 30-day stress |
| Less-stable retail deposits | 10% | Higher withdrawal risk in stress |
| Wholesale operational deposits | 25% | Partially retained for clearing / custody services |
| Non-operational wholesale funding | 40% | Higher flight risk; non-relationship funding |
| Secured funding - Level 1 collateral | 0% | Assumed to roll over; high-quality collateral |
| Secured funding - Level 2A collateral | 15% | Some roll-over risk |
| Secured funding - Level 2B collateral | 25% | Elevated roll-over risk |
Standard run-off rates under Basel III / US LCR rule. Actual rates may differ by jurisdiction.
Frequently asked questions
What is the minimum LCR required by Basel III?
Basel III requires a minimum LCR of 100% for internationally active banks. This means a bank must hold enough HQLA to cover at least 100% of its net cash outflows over a hypothetical 30-day stress period. Many jurisdictions apply the 100% standard to domestic banks as well, and supervisors often expect banks to hold a buffer above the minimum to account for intra-period variation.
Why is there a haircut on Level 2A and Level 2B assets?
Haircuts reflect the fact that these assets cannot always be converted into cash at their face value in a stressed market. A 15% haircut on Level 2A assets accounts for the bid-ask spread and possible price decline for high-grade bonds in a market selloff. The 50% haircut on Level 2B assets is much steeper because corporate bonds and equities typically suffer larger and faster price falls in a crisis, and their liquidity can disappear quickly. Level 1 assets such as cash and central-bank reserves carry no haircut because they are already cash or immediately convertible at par.
What does the 75% inflow cap mean?
Banks can reduce their net outflows by counting expected cash inflows, but only up to 75% of gross outflows. This cap means that at least 25% of gross outflows must be covered by HQLA regardless of how many receivables the bank expects. The cap prevents a bank from claiming a very low or zero net outflow position simply by pointing to a large pipeline of incoming payments, since those payments may not materialise in a genuine stress event.
What is the difference between the Level 2 cap and the Level 2B cap?
Two separate concentration limits apply to non-Level-1 HQLA. The Level 2 cap limits the combined total of Level 2A and Level 2B assets (after haircuts) to 40% of total HQLA, ensuring Level 1 always makes up the majority. The Level 2B cap goes further and limits Level 2B assets alone to 15% of total HQLA, reflecting the lower liquidity reliability of these assets in stress. If either limit is breached, the excess is simply excluded from the buffer - it does not improve the LCR.
How does the LCR differ from the Net Stable Funding Ratio (NSFR)?
The LCR and NSFR are complementary Basel III liquidity standards that look at different time horizons. The LCR focuses on a short-term 30-day stress scenario and requires sufficient HQLA to cover net stressed outflows. The NSFR takes a one-year structural view and requires that stable funding sources cover the stable funding requirements of longer-dated assets. A bank can have a strong LCR but weak NSFR if it relies heavily on short-term wholesale funding that would roll off well inside one year.
Which assets count as Level 1 HQLA?
Level 1 HQLA includes coins and banknotes, central bank reserve balances that can be drawn down in a stress period, and marketable securities issued or guaranteed by a sovereign, central bank, or multilateral development bank that carry a 0% Basel II risk weight. These must be unencumbered (not pledged as collateral), freely transferable, and held outside of a securitization structure to qualify.
Sources
- Basel Committee on Banking Supervision, Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools (2013)
- Bank for International Settlements, Frequently asked questions on the Basel III standardised approach for measuring counterparty credit risk exposures
- U.S. Office of the Comptroller of the Currency, Basel III LCR Formulas