Indeed, it was difficult at times to distinguish between liquidity and solvency crises at particular firms. The Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) have placed the funding of large banks on a firmer footing.
The LCR requires a large bank to hold enough high-quality liquid assets to cover the net cash outflows the bank would expect to occur over a 30-day stress scenario. This requirement establishes a buffer against liquidity risk that reduces the bank’s vulnerability to a run, such as materialized in the recent crisis.