Liquidity coverage describes how far a bank's stock of easily sold assets covers the cash it might need to pay out during a short period of stress, and it is measured formally by the Liquidity Coverage Ratio (LCR), which has its own main entry. The shorter phrase is used informally, for example when a bank says its liquidity coverage is strong, or in rules that refer to a "liquidity coverage requirement".
Under the Basel III framework, the ratio compares a bank's high-quality liquid assets with its expected net cash outflows over 30 days of stress, and banks are expected to keep it at or above 100 per cent. Cash, central bank reserves and high-grade government bonds count most fully as liquid assets. The measure works alongside wider liquidity risk management and the daily monitoring of intraday liquidity.
Outside banking, the phrase is sometimes borrowed for payment firms and stablecoin issuers to describe how much of their holdings can be turned into cash quickly to meet withdrawals or stablecoin redemptions, though those firms are not subject to the Basel ratio itself.