Liquidity Risk Management : A Complete Guide to LCR & NSFR.

Name: Liquidity Risk Management : A Complete Guide to LCR & NSFR.
Rating: 4.6 (11 reviews)

Learn how banks manage Liquidity, measure Liquidity Risk, use Repo & Reverse Repo markets with deep dives into LCR, NSFR

Created byKanhaiaya Singh

Last updated 1/2026

English

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What you'll learn

Understand the core concepts of liquidity, why it matters, how shortfalls can impact financial institutions, and why it is critical to banking stability.
Understand liquidity risk and real-world liquidity stress scenarios, and analyze how they impact a bank's ability to meet short-term and long-term obligations.
Understand the Liquidity Coverage Ratio (LCR) framework, how to calculate LCR, HQLA classification, cash inflow, cash outflow, and regulatory threshold.
Gain hands-on experience in reading and analyzing regulatory LCR disclosures from an Indian bank.
Understand Net Stable Funding Ratio (NSFR), how ASF and RSF factors work, how long-term funding stability is assessed, and regulatory NSFR disclosures.
Understand Repo and Reverse Repo transactions, including their uses, characteristics, and impact and treatment in LCR & NSFR, along with practical examples.
Apply liquidity risk principles to real banking scenarios, disclosures, and regulatory reporting, preparing you for roles in risk, compliance, and finance.

Course content

5 sections • 32 lectures • 2h 22m total length

Course introduction3:37
Gain a practical, comprehensive guide to liquidity risk management for banking and finance professionals. Master Basel III standards like LCR and NSFR and apply cash flow analysis for resilience.
Liquidity Introduction2:51
Define liquidity and its importance for banks, and outline regulation objectives in liquidity risk management for resilience during stress. Link day-to-day decisions to bank stability across operations, credit, treasury.
Why Do Banks Need Liquidity?1:39
Understand why banks need liquidity to meet customer withdrawals, disbursements, and obligations. Explore how liquidity supports maturing liabilities, daily operations, and resilience during stress, signaling strength to regulators and customers.
How Much Liquidity Does a Bank Need ?2:28
Learn how banks balance liquidity and profitability to survive short-term shocks and avoid excessive liquidity. See how monitoring and LCR and NSFR guide optimal liquidity for different business models.
Objective of Liquidity Regulation1:41
Liquidity regulation keeps banks resilient in stress by absorbing shocks, reducing contagion, and standardizing LCR and NSFR for a safer, more stable global banking system.
Section 1: Liquidity Quiz

Liquidity Risk Introduction3:25
Learn how liquidity risk threatens banks when short-term obligations outpace available liquid assets, risking losses and confidence, with regulators urging proactive, standard risk management under stress.
Liquidity Risk Example2:55
Analyze liquidity risk through a relatable ABC bank scenario, showing how cash, asset liquidity, and obligations expose vulnerability and drive stress testing, liquidity buffers, and LCR and NSFR.
Liquidity Stress Scenarios4:04
Explore real-world liquidity stress scenarios that trigger bank funding strains, such as deposit runoff, asset-liability mismatches, volatile funding, and rapid rate moves.
Section 2: Liquidity Risk Quiz

LCR Introduction3:26
Grasp the liquidity coverage ratio (LCR) under Basel III, detailing high-quality liquid assets (HQLA), 30-day net cash outflows, and the 100% regulatory requirement.
High Quality Liquid Assets (HQLA)1:41
Identify high quality liquid assets (HQLA) as the LCR numerator, focusing on unencumbered, readily convertible assets that retain value under stress, and note Level 1, 2A, 2B classifications.
HQLA Key Terminologies2:10
Learn how encumbrance and haircuts determine which assets qualify as high-quality liquid assets, how much value counts, and the role of unencumbered assets in the liquidity coverage ratio framework.
HQLA Categories8:40
Explore how regulators categorize high-quality liquid assets into level 1, level 2a, and level 2b under the LCR framework, detailing haircuts and caps to shape diversified, resilient liquidity buffer.
Total Net Cash Outflows10:40
Explore how the LCR denominator computes total net cash outflows over 30 days, using run-off rates and 75% inflow caps to model liquidity stress.
Key Categories of Deposits8:47
Examine the key categories of deposits in the LCR framework, differentiating retail and wholesale, and stable versus less stable deposits to determine runoff rates and liquidity needs.
LCR Disclosure Format4:10
Analyze the LCR disclosure format under Basel III, detailing HQLA, cash outflows and inflows, and the 100% minimum, with a real-world Central Bank of India example.
Insufficient HQLA Scenarios11:34
Explore alternative liquidity approaches to LCR compliance, including central bank liquidity facilities, foreign currency HQLAs, and expanded level 2 assets with higher haircuts, all under strict supervisory controls.
Summary: Liquidity Coverage Ratio (LCR)2:29
Learn how the liquidity coverage ratio uses Level 1, Level 2A, Level 2B assets with haircuts and caps. Calculate LCR as HQLA over net cash outflows, minimum 100%, India's 235.08%.
Section 3: Liquidity Coverage Ratio (LCR) Quiz

NSFR Introduction3:33
Explore how the net stable funding ratio promotes long-term funding resilience under Basel III and complements the LCR with a one-year horizon, through available and required stable funding.
Available Stable Funding (ASF)5:52
Explore available stable funding under the NSFR and how ASF factors rate funding sources, from 100% for regulatory capital to 0% for the least stable funding sources.
Required Stable Funding (RSF)8:55
Learn how the NSFR uses required stable funding, calculating RSF as asset carrying value times a liquidity-based factor to cover long-term and illiquid assets and off-balance sheet exposures.
NSFR Disclosure Format3:52
Outline the NSFR disclosure format under Basel III, detailing ASF and RSF classifications, maturity buckets, and the final NSFR outcome of 131.05% for Bandhan Bank as of March 31, 2025.
Summary: Net Stable Funding Ratio (NSFR)3:12
Assess the net stable funding ratio to ensure long-term resilience by comparing available stable funding with required stable funding, including ESF, RSF, and off-balance sheet exposures.
Section 4: Net Stable Funding Ratio (NSFR) Quiz

Repo & Reverse Repo Introduction9:46
Learn how repos and reverse repos deploy secured liquidity, support intraday operations, and influence LCR, NSFR, and HQLA management under Basel III.
Reverse Repo: Accounting & Liquidity Characteristics3:38
Explore the accounting treatment and liquidity implications of repos and reverse repos, including collateral encumbrance, rehypothecation, and effects on LCR and NSFR for secure short-term funding.
Repo Treatment in LCR2:56
Explore how repos affect the liquidity coverage ratio, showing cash inflows capped at 75%, full outflows at maturity, and encumbrance of level 1 assets that reduces HQLA, often deteriorating LCR.
Reverse Repo Treatment in LCR3:13
Reverse repos create outflow under lcr; 100% deduction if maturing within 30 days; inflows capped at 75%; collateral is hqla only if unencumbered and re-hypothecatable; encumbrance beyond 30 days excludes.
Repo Treatment in NSFR3:02
Learn how depots affect NSFR through ASF and RSF factors under Basel III, with maturity, collateral type, and encumbrance duration shaping long-term funding.
Reverse Repo Treatment in NSFR3:05
Analyze how reverse repos, as short-term secured lending, affect NSFR by increasing RSF without boosting ASF, with impact depending on collateral type, maturity, and rehypothecation rights.
A Practical Example - Repo Case3:59
Analyze a repo example under Basel III, showing how a 10% haircut on Rs.100 level 1 securities encumbers collateral and drives LCR and NSFR effects via inflows, outflows, and HQLA.
A Practical Example – Reverse Repo Case4:23
A practical reverse repo example demonstrates how a 10% haircut affects LCR and NSFR, including collateral valuation, HQLA qualification, inflows at maturity, and rehypothecation rights.
Summary: Repo & Reverse Repo4:20
Compare repos and reverse repos, detailing secured borrowing and lending, collateral treatment, and their effects on LCR and NSFR under different collateral and cash flow scenarios.
References & Thank You2:08
Explore the key regulatory references from BIS and RBI, including Basel III on LCR and NSFR, BIS disclosure requirements, and Indian bank disclosures in liquidity risk management.
Section 5: Repo & Reverse Repo Quiz
Final Assessment

Requirements

No prior experience in banking or finance is required—this course is designed to be accessible to beginners and professionals alike.
A basic understanding of financial terms like deposits, loans, and balance sheets will be helpful but not mandatory.
No special tools or software are needed—just a laptop or mobile device with internet access to view the course content.
A curious mindset and a willingness to explore real-world banking scenarios will help you get the most out of this course.

Description

“This course contains the use of artificial intelligence to generate relevant Slide Images and and Course content designing and formatting.”

In today’s dynamic financial landscape, liquidity risk management is a critical pillar of banking stability and regulatory compliance. Banks survive and grow only when they manage liquidity with precision. This course offers a comprehensive, practical, and beginner-friendly overview of Liquidity, liquidity risk, Repo & Reverse Repo with a strong focus on Basel III standards - the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

You’ll begin by understanding the fundamentals of liquidity, Liquidity Risk, its role in banking operations, and how liquidity shortfalls can trigger systemic crises. We will explore real-world liquidity stress scenarios, helping you recognize early warning signals and assess the impact of funding disruptions.

The course then dives deep into the LCR framework, covering High-Quality Liquid Assets (HQLA), cash outflows, cash inflows, and regulatory thresholds, followed by a detailed walkthrough of LCR disclosure formats using actual Indian bank LCR disclosure.

Next, we unpack the NSFR framework, explaining Available Stable Funding (ASF) and Required Stable Funding (RSF) categories, maturity buckets, and off-balance sheet treatment. You’ll analyze NSFR disclosure templates, including a real example from and Indian Bank, to understand how long-term funding stability is measured and reported.

we will end the course with a dive deep into repo and reverse repo transactions, exploring how they operate, why banks use them, and how they impact regulatory ratios LCR & NSFR through real‑world examples.

Whether you are a student, Banking Professional, Regulatory Analyst, Risk Manager or Finance Enthusiast this course equips you with the skills to interpret, explain, and apply liquidity risk metrics confidently in real-world contexts.

Who this course is for:

Banking and finance professionals looking to understand liquidity risk, LCR, and NSFR.
Regulatory reporting, compliance, and risk analysts seeking practical, disclosure-based insights.
Students, freshers, and job aspirants preparing for roles in Banking, Risk Management, Audit, Consulting, and exams like CAIIB, FRM, CFA, IIBF, IBPS PO, RBI Grade B, Bank Specialist Officer, etc.
Anyone curious about how banks manage liquidity under stress using Basel III standards.

Liquidity Risk Management : A Complete Guide to LCR & NSFR.

What you'll learn

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Course content

Liquidity5 lectures • 12min

Liquidity Risk3 lectures • 10min

Liquidity Coverage Ratio (LCR)9 lectures • 54min

Net Stable Funding Ratio (NSFR)5 lectures • 25min

Section: Repo & Reverse Repo10 lectures • 41min

Requirements

Description

Who this course is for: