10th Apr 2018

Liquidity Coverage Ratio | Regulatory Challenges for Treasury & Finance

With Liquidity Coverage Ratio (LCR), corporate banking providers will have less appetite to take on unpredictable deposits, or fluctuations in the deposit base with it impacting on their ability to comply. Corporates require the technology to manage balance sheets and cash flows more than ever.



The Liquidity Coverage Ratio. A very important part of the Basel accords. They define how much liquid assets should be held by FIs. How do these regulations affect those in the treasury and finance world?

Inevitably liquidity coverage ratio is something that the banks are increasingly aware of when it comes to the level of deposits they want to attract to the balance sheet. This is due to the concept of liquidity coverage ratio friendly, or unfriendly deposits. In the case of Liquidity Coverage Ratio, we’re likely to see banks having less of an appetite to take on unpredictable deposits or fluctuations in deposit bases because it impacts their ability to comply with LCR.

Its therefore likely that corporate customers are going to be faced with banks introducing measures in order to encourage more predictable behavior from them. Corporates will be faced with increased demand from banks to manage cash and balance sheets in ways that they possibly haven’t before. This is because their activity has an impact on the banks’ ability to manage the Liquidity Coverage Ratio, and so what that means is bringing this full circle from a technology perspective. Therefore corporates need the right tools to be able to manage their balance sheets and cash flows according to the requirements of their banking partners; businesses can’t have the onus put on them without having the right levers in place to do so.