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      Question

      A 'Liquidity Coverage Ratio' (LCR) ensures that the

      financing company:
      A Has enough high-quality liquid assets (HQLA) to survive a 30-day stress scenario. Correct Answer Incorrect Answer
      B Has a high enough credit rating to borrow from the RBI. Correct Answer Incorrect Answer
      C Has enough cash to pay its employees for 10 years. Correct Answer Incorrect Answer
      D Only lends to liquid sectors like IT. Correct Answer Incorrect Answer
      E Covers all its losses using its annual profit. Correct Answer Incorrect Answer

      Solution

      The LCR is a Basel III requirement that ensures financial institutions have enough cash and "cash-like" assets to meet all their obligations during a 30-day period of extreme stress. The Liquidity Coverage Ratio (LCR) is a Basel III regulatory standard requiring banks to hold enough High-Quality Liquid Assets (HQLA)—such as cash or government securities—to survive a 30-day stress scenario (e.g., a bank run). It ensures banks can meet short-term obligations without relying on central bank aid, aiming for a minimum 100% ratio.

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