liquidity standards

Liquidity standards are regulations that ensure banks and financial institutions have enough easily accessible assets, like cash or assets that can quickly be turned into cash, to meet short-term obligations and unexpected demands. These standards help prevent banks from running out of funds during financial stress, promoting stability in the financial system. Essentially, they require institutions to maintain a healthy level of liquid assets to cover immediate needs, reducing the risk of insolvency and protecting depositors and the broader economy.