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Finance & Banking vocabulary · Risk Management

Liquidity

Meaning in finance & banking, with examples

/lɪˈkwɪdəti/nounCore term

In finance & banking, liquidity means: How easily an asset can be turned into cash without losing value, or how much cash and easily sold assets a bank or company has to meet its payments.

In Turkish: likidite, nakde dönüşebilirlik

How it is used

A core banking concept. Treasury teams manage liquidity every day, and regulators check liquidity ratios such as the LCR. People say a bank has enough liquidity, faces a liquidity shortage or receives liquidity from the central bank.

Example sentences

  1. The bank keeps a large buffer of government bonds to protect its liquidity.

  2. The central bank provided extra liquidity to the market during the crisis.

Common collocations

  • liquidity risk
  • liquidity ratio
  • provide liquidity
  • liquidity buffer
  • liquidity shortage
  • cash flowThe movement of money into and out of a business over a period. Positive cash flow means more money is coming in than going out.
  • assetSomething of value that a person or company owns or controls, such as cash, buildings, receivables or investments.
  • central bankA country's or region's main monetary authority, which issues money, sets the policy interest rate and works to keep prices and the financial system stable.
  • working capitalThe money a business has available for its daily operations, calculated as current assets minus current liabilities.
  • stress testAn analysis that checks whether a bank would have enough capital and liquidity to survive a severe but possible shock, such as a deep recession.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.