The liquidity coverage ratio is the Basel III measure of whether a bank holds enough unencumbered high-quality liquid assets to survive a thirty-day stress scenario without outside help. It compares a stock — the HQLA buffer, after haircuts and category caps — against a flow, the net cash outflow the stress scenario assumes. The net stable funding ratio is its structural companion, comparing available stable funding against required stable funding over a one-year horizon.
Arb Digital built this page as a teaching aid for the shape of both calculations. It publishes no haircut schedule and no run-off table, because those are set by each supervisor, differ by asset and counterparty, and are revised. Every weighting on this page is a value you enter. The actual regulatory calculation is defined by your supervisor's rulebook, and nothing here substitutes for it.
What This LCR Calculator Does
Enter the market value of your Level 1, Level 2A and Level 2B assets together with the haircut applicable to each, the caps that limit how much of the buffer Level 2 and Level 2B may represent, and the gross thirty-day outflows and inflows with their weightings. The hero figure is the resulting liquidity coverage ratio. The grid gives the HQLA buffer after haircuts and caps, the net thirty-day cash outflow, the net stable funding ratio from the available and required stable funding totals you supply, and the amount by which the buffer exceeds or falls short of the outflow.
The category caps are applied in the order the framework applies them: the Level 2B limit first, then the overall Level 2 limit, trimming Level 2B before Level 2A when the overall cap binds. This is a simplified representation of the cap mechanism. The framework sets out an adjusted-amount approach that also considers the unwinding of short-term secured funding and lending transactions, and that refinement is not modelled here.
How to Use It
- Start with your rulebook, not this page. Read the applicable haircuts, run-off rates and inflow weightings your supervisor publishes before entering anything.
- Enter each HQLA tier at market value along with its haircut. Only unencumbered assets that meet the eligibility conditions belong here at all.
- Set the category caps that constrain the composition of the buffer.
- Enter gross outflows and inflows with the blended weightings your own category-by-category analysis produced, plus the inflow cap.
- Add weighted available and required stable funding for the NSFR, then press Calculate.
The Formula and How It Is Calculated
The headline relation is LCR = stock of HQLA ÷ total net cash outflows over the next 30 calendar days. Net cash outflows are weighted outflows less weighted inflows, with inflows capped at a stated percentage of weighted outflows. The NSFR is available stable funding ÷ required stable funding.
Work the default figures through. Level 1 assets of 800,000,000 at a zero haircut contribute 800,000,000. Level 2A of 300,000,000 at a 15% haircut contributes 255,000,000. Level 2B of 120,000,000 at a 50% haircut contributes 60,000,000. Neither cap binds on these numbers, so total HQLA is 1,115,000,000.
On the outflow side, gross outflows of 4,000,000,000 at a 30% blended run-off rate give weighted outflows of 1,200,000,000. Gross inflows of 900,000,000 at a 50% weighting give 450,000,000, which is below the inflow cap of 75% of 1,200,000,000, or 900,000,000, so the full 450,000,000 counts. Net cash outflows are 1,200,000,000 − 450,000,000 = 750,000,000. The LCR is 1,115,000,000 ÷ 750,000,000 = 148.67%, a surplus of 365,000,000 over the outflow figure. The NSFR on the stable funding inputs is 6,200,000,000 ÷ 5,400,000,000 = 114.81%.
Why Every Weighting Is an Input Here
A haircut is not a property of an asset. It is a supervisory judgement about how much value that asset would lose if it had to be sold or repo'd in stress, and it varies by asset class, by rating, by currency and by jurisdiction. Run-off rates are the same kind of judgement applied to funding: how much of a retail deposit, a corporate operational balance, or an unsecured wholesale line would actually leave in thirty days. Supervisors set these, they differ between jurisdictions implementing the same framework, and they change.
Publishing them on a web page would therefore be actively harmful, because a reader would treat a stale figure as authoritative. The Basel Committee's Liquidity Coverage Ratio standard is the primary source for the framework's own values, and your national supervisor's implementing rules are the ones that bind you. Read both; then enter what applies.
This also explains the blended-rate design of the outflow fields. A real LCR calculation runs dozens of outflow categories separately, each with its own rate, and the same for inflows. The single blended rate here is a summary of that work, not a replacement for it. If you cannot state where your blended rate came from, the ratio it produces means nothing.
The Caps Are What Make the Buffer Actually Liquid
Without composition limits, a bank could satisfy the ratio with a buffer made almost entirely of the least liquid eligible assets, which would defeat the purpose. The Level 2 cap limits how much of the buffer can come from the second tier at all, and the Level 2B cap constrains the least liquid part of that tier further. Both are expressed as percentages of total HQLA, which makes them self-referential: the limit depends on the buffer, and the buffer depends on the limit.
The calculator resolves that algebraically rather than iteratively. If Level 2B may be at most fifteen per cent of total HQLA, then it may be at most fifteen eighty-fifths of everything else, and the same rearrangement applies to the overall Level 2 cap. Watch the effect by raising the Level 2B input sharply while leaving Level 1 unchanged: past a point, additional Level 2B assets stop increasing the buffer at all. That is the cap doing its job, and it is a common surprise for anyone who has only ever seen the headline ratio.
LCR and NSFR Answer Different Questions
The LCR is about a thirty-day siege. The net stable funding ratio is about the structure of the balance sheet over a year, requiring that banks maintain a stable funding profile relative to the composition of their assets and off-balance-sheet activities. A bank can pass one and fail the other: a large short-term liquid buffer funded overnight satisfies the first while leaving a maturity mismatch the second is designed to catch.
The NSFR fields on this page take already-weighted totals rather than raw balances, because the available and required stable funding factors form a long schedule that varies by instrument, maturity and counterparty. Reproducing that schedule here would be exactly the sort of stale table this page avoids. Compute the weighted totals from your rulebook and enter the results.
How This Differs From Corporate Liquidity Ratios
The LCR looks superficially like a corporate liquidity measure, and it is not one. Our current ratio calculator compares current assets with current liabilities from a balance sheet, using accounting classifications and no stress assumptions at all. The LCR applies a defined stress scenario, haircuts the assets, weights the flows, caps the composition of the buffer and caps the inflows. Two ratios, two entirely different constructions.
The same boundary applies to the rest of the ratio family. The debt to equity ratio calculator and interest coverage ratio calculator are solvency and servicing measures for ordinary companies. For the credit-risk side of a bank's prudential framework, our loss given default calculator covers expected credit loss parameters, and the bond duration calculator covers interest rate sensitivity in the banking and trading books.
Arb Digital builds free tools and content for technical audiences, designed to say clearly what a number can and cannot tell you.
Browse the free tools hub Talk to Arb DigitalCommon Mistakes to Avoid
- Treating the values in these fields as regulatory figures. They are placeholders. Only your supervisor's rulebook sets the haircuts, run-off rates and caps that apply.
- Including encumbered assets in HQLA. Assets pledged as collateral are not available in stress and do not belong in the buffer.
- Forgetting the inflow cap. Without it, a bank could rely almost entirely on expected receipts, which is precisely the assumption stress invalidates.
- Using a single blended run-off rate as though it were analysis. The real calculation runs category by category; a blended rate is a summary of work already done.
- Reading the LCR as a solvency measure. It says nothing about capital adequacy or asset quality — a solvent bank can fail it and a weak bank can pass it.
Related Free Tools From Arb Digital
For corporate liquidity and gearing see the current ratio calculator, debt to equity ratio calculator and interest coverage ratio calculator. For prudential credit risk, the loss given default calculator covers expected credit loss parameters, the bond duration calculator covers rate sensitivity, and the WACC calculator covers funding cost. The free tools hub lists the rest.
Frequently Asked Questions
It is the Basel III measure comparing a bank's stock of unencumbered high-quality liquid assets with its net cash outflows over a thirty-day stress scenario. The assets are haircut and the flows are weighted according to supervisory assumptions about how each behaves under stress.
Because they are set by supervisors, differ by asset class, counterparty and jurisdiction, and are revised. A table on a web page would be treated as authoritative while quietly going out of date. Every weighting here is an input so the page cannot mislead about what the rules currently say.
They limit how much of the buffer can consist of less liquid eligible assets. Without them, a bank could meet the ratio with a portfolio that would be difficult to monetise in exactly the conditions the ratio is designed for. Because the caps are percentages of total HQLA, they are self-referential and resolved algebraically.
To stop a bank from satisfying the requirement purely by assuming money will arrive. Stress is precisely the situation in which expected receipts do not all materialise, so the framework requires a genuine asset buffer rather than a projected net position.
The LCR covers a thirty-day stress horizon and asks whether the liquid buffer is large enough. The NSFR covers about a year and asks whether the funding structure is stable relative to the assets it supports. A bank can satisfy one and fail the other, which is why both exist.
No. A current ratio compares balance sheet classifications with no stress assumptions, haircuts, weightings or caps. The LCR applies a defined stress scenario to both sides of the calculation and constrains the composition of the numerator. The two are not comparable.
No. This is a teaching aid that shows the shape of the calculation. The reportable figure is produced under your supervisor's rulebook, category by category, with the adjusted-amount cap mechanism and every definitional detail the framework specifies. Use your regulatory reporting systems and your supervisor's guidance.
This tool is provided for educational use only and is not regulatory, financial or compliance advice. It publishes no haircut, run-off rate or weighting as fact — every figure applied is one you entered. The binding calculation is defined by the applicable supervisory rulebook, and a qualified risk or regulatory professional should determine any reported figure.
