Liquidity Coverage Ratio Disclosure Standards

The fundamental role of banks in financial intermediation makes them inherently vulnerable to liquidity risk, of both an institution-specific and a market nature. Financial market developments have increased the complexity of liquidity risk and its management. During the early “liquidity phase” of the financial crisis that began in 2007, many banks – despite meeting existing capital requirements then in effect – experienced difficulties because they did not manage their liquidity in a prudent manner. The difficulties experienced by some banks, which, in some cases, created significant contagion effects to the broader financial system, were due to lapses in basic principles of liquidity risk measurement and management.