ECB expects all banks to maintain liquidity coverage ratio of above 100% as of Jan. 1, 2022
The European Central Bank (ECB) announced Friday it will not extend liquidity relief for banks beyond this year.
“The ECB sees no need to extend beyond December 2021 the liquidity relief measure that allowed banks to operate with a liquidity coverage ratio below 100%,” it said in a statement.
“As the specific relief measure granted at the outset of the pandemic has not been extended,the ECB expects all banks to maintain a liquidity coverage ratio of above 100% as of 1 January 2022,” it added.
The aggregate liquidity coverage ratio of banks under the ECB’s direct supervision currently stands at around 170%, up from about 140% before the coronavirus pandemic.
When the pandemic began, the ECB encouraged banks in March 2020 to make use of their liquidity buffers to support the economy.
A bank’s liquidity coverage ratio is the relationship between its buffer of high-quality liquid assets and the cash outflows it may face over a 30-day period.