The Liquidity Coverage Ratio means that banks will have enough high-quality liquid assets available to meet their needs in the case of a stress scenario that lasts 30 days, thereby ensuring that they can continue to operate when access to funding may be impaired.
Round about 2005 British banks were sourcing as much as 1/3 of their funding by borrowing on financial markets at short term, rather than through customers’ deposits. Confidence in the value of the short term instruments used in the financial markets began to evaporate in 2005, with the large-scale failure of sub-prime mortgages in the US.