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Explanation:
The Liquidity Coverage Ratio (LCR) is a Basel III requirement designed to ensure that financial institutions have the necessary assets on hand to ride out short-term liquidity disruptions. Specifically, it requires banks to hold an amount of high-quality liquid assets (HQLA) that equals or exceeds their total net cash outflows over a 30-day stress period. Thus, an LCR of 152% indicates the bank can comfortably survive liquidity disruptions in the next 30 days.
Q.2358 Berthold Bruhne, a risk manager for the bank of Salzburg, was attending a board meeting where he presented the results of the liquidity coverage ratio (LCR) calculation. According to him, the bank’s LCR stood at 152% as of December 31st, 2016, safely above the required minimum. His conclusion was that the bank could survive liquidity disruptions in the next:
A
1 year
B
60 days
C
30 days
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