What is liquidity coverage ratio in SAP FS-LRM - Liquidity and Risk Management?

SAP Term: liquidity coverage ratio

• Component: FS-LRM

• Component Name: Liquidity and Risk Management

• Description: Key figure prescribed by the international Basel III regulatory framework that represents a bank's ability to cover its outflows with high-quality liquid assets over a period of 30 days.

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• Key Concepts: 
  The liquidity coverage ratio (LCR) is a metric used to measure the ability of a financial institution to meet its short-term obligations. It is calculated by dividing the total amount of liquid assets held by the institution by its total net cash outflows over a certain period of time. The LCR is an important measure of financial stability and is used by regulators to ensure that banks are able to meet their short-term obligations. 
  
  How to use it: 
  The LCR is calculated using the FS-LRM Liquidity and Risk Management component of SAP. This component allows users to enter data related to their financial institution’s assets, liabilities, and cash flows. The component then calculates the LCR based on this data. 
  
  Tips & Tricks: 
  When calculating the LCR, it is important to ensure that all relevant data is entered accurately. This includes both assets and liabilities, as well as any cash flows that may have occurred during the period in question. Additionally, it is important to ensure that all data is up-to-date in order to get an accurate picture of the institution’s liquidity position. 
  
  Related Information: 
  The LCR is just one of many metrics used to measure a financial institution’s liquidity position. Other metrics include the net stable funding ratio (NSFR) and the leverage ratio (LR). Additionally, there are other components within SAP that can be used to measure liquidity, such as FS-LRM Liquidity and Risk Management.