Banking (prudential standard) determination No. 3 of 2025
Liquidity coverage ratioLiquidity coverage ratio
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Liquidity coverage ratio
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The objective of the LCR is to ensure that an ADI maintains an adequate level of unencumbered HQLA that can be converted into cash to meet its liquidity needs for a 30 calendar day time period under a severe liquidity stress scenario. The LCR has two components:
the value of the stock of HQLA; and
total net cash outflows, calculated according to the scenario parameters set out in this Attachment.
The LCR is calculated as:
Start formula start fraction Stock of HQLA over Total net cash outflows over the next 30 calendar days end fraction end formula.
An ADI must include an appropriate buffer of HQLA over the LCR requirement in line with its liquidity risk tolerance.
During a period of financial stress, an ADI may need to liquidate part of its stock of HQLA and/or draw on its Committed Liquidity Facility (CLF) with the RBA, using the cash generated to cover cash outflows; as a consequence, the LCR may fall below the minimum level required under paragraph 55 of this Prudential Standard. An ADI must inform APRA immediately in the event of an actual breach of its LCR requirement or if it becomes aware of circumstances that may result in a breach of its LCR requirement.