Could the banks cope with large deposit outflows? Assessment according to a new liquidity metric
In this study, we show that the banks optimise their liquidity position at the points in time on which the international liquidity metrics LCR and NSFR are focused. At other times, the banks demonstrate higher liquidity risks. To complement the existing liquidity metrics, liquidity risk should therefore also be measured by studying more future points in time.
In this light, the Riksbank has defined a new metric – Deposit Loss Capacity (DLC). This metric calculates when (that is, at which future point in time) a bank’s liquidity position is poorest according to contractual maturities. The metric also calculates how large bank run a bank could cope with at that time.
Authors: Ida Hansson and Tobias Lindqvist, work in the Financial Stability Department of the Riksbank.
Published: 9 May 2022