Insider Economy Liquidity coverage ratio of Cypriot banks 4th highest in E.U.

Liquidity coverage ratio of Cypriot banks 4th highest in E.U.

Cypriot banks had the fourth highest liquidity coverage ratio (LCR) in the second quarter of 2018, a European Banking Authority (EBA) report published today, shows.

The three Cypriot banks which were included in the report (Hellenic Bank, RCB and Bank of Cyprus) had a liquidity coverage ratio over 200%.

According to the Basel Accord III, banks are required to have a LCR ratio of a minimum 100%.

EU banks’ average LCR was 146%.

Cypriot banks have a high LCR in order to be able to counterbalance the high amount of non-performing loans in their portfolios.

The majority of countries in the E.U. have LCR levels between 100% and 200%.

Some countries such as Bulgaria, Romania and Slovenia, show LCR average levels above 300%. Cyprus, Latvia and Lithuania show ratios above 200%, while Greece shows LCR average levels below 100%.

According to investopedia.com, the liquidity coverage ratio (LCR) refers to the share of sufficient high-quality liquid assets held by financial institutions to cover their total net cash outflows over 30 days.

This ratio is essentially a generic stress test that aims to anticipate market-wide shocks and make sure that financial institutions possess suitable capital preservation, to ride out any short-term liquidity disruptions, that may plague the market.

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