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Calculate a bank's defined liquid assets as a share of total assets using consistent quarterly balances. This worked example shows the classifications, reconciliation, and difference from the liquidity coverage ratio.
The liquid asset ratio formula for banks is defined liquid assets divided by total assets, expressed as a percentage. Its value depends on which assets are actually available under the bank's stated policy. A quarterly comparison needs the same classification rules and reporting boundary on both dates.
Liquid assets to total assets = Defined liquid assets / Total assets × 100
This is a stock measure: how much of the reported balance sheet consists of assets designated as liquid. It helps treasury and finance discuss the composition of assets and the availability of resources. It does not establish how long the bank could withstand withdrawals.
A balance sheet measures assets and obligations at a particular date, as the SEC's financial statement guide explains. Use that same date for every numerator and denominator row. Do not combine today's cash availability with an earlier quarter's total assets.
The ratio also differs from an equity cushion. Use equity to total assets for the funding share attributable to equity; liquid assets describe asset composition, while equity describes a source of funding.
For this example, a fictional US regional bank adopts a management definition containing unrestricted cash and central bank reserve balances, unrestricted demand balances due from banks, and specified unpledged Treasury and agency securities readily convertible to cash. The definition uses carrying amounts throughout. It excludes restricted cash, pledged securities, loans, and other assets.
This is an illustrative reporting policy, not a regulatory definition or an assertion that every agency security is equally liquid. Treasury must verify eligibility, marketability, settlement access, and restrictions security by security. Accounting classification alone does not prove immediate availability.
The FDIC's interagency liquidity guidance identifies a cushion of liquid unencumbered assets, cash flow projections, diversified funding, and contingency funding planning as important liquidity management tools. That broader view matters: the assets-based percentage is one input to a funding discussion.
Prepare an export with reporting date, legal entity, account or security identifier, carrying balance, asset class, restriction flag, pledge flag, and eligibility decision. Retain a reason for every excluded balance. Keep the bank entity separate from a holding company unless the report explicitly uses a consolidated group boundary.
The following balances are invented for a calculation example. They are not an observed bank average or a recommended liquidity level. All amounts are USD, and both quarters follow the same management definition.
| Asset schedule row | March 31, 2026 (USD) | June 30, 2026 (USD) | Included in liquid assets? |
|---|---|---|---|
| Unrestricted cash and reserves | 70,000,000 | 60,000,000 | Yes |
| Unrestricted demand balances due from banks | 20,000,000 | 20,000,000 | Yes |
| Eligible unpledged Treasury securities | 110,000,000 | 90,000,000 | Yes |
| Eligible unpledged agency securities | 40,000,000 | 30,000,000 | Yes |
| Pledged securities | 60,000,000 | 80,000,000 | No |
| Restricted cash | 10,000,000 | 10,000,000 | No |
| Loans, net of allowance | 650,000,000 | 710,000,000 | No |
| Other assets | 40,000,000 | 50,000,000 | No |
First sum the eligible rows, then sum every asset row for the denominator. Round displayed ratios and percentage-point changes to two decimals; keep the underlying dollar balances and calculations unrounded.
| Calculation step | March 31, 2026: amounts (USD) and ratios | June 30, 2026: amounts (USD) and ratios |
|---|---|---|
| Liquid assets (USD) | 70,000,000 + 20,000,000 + 110,000,000 + 40,000,000 = 240,000,000 | 60,000,000 + 20,000,000 + 90,000,000 + 30,000,000 = 200,000,000 |
| Excluded assets (USD) | 60,000,000 + 10,000,000 + 650,000,000 + 40,000,000 = 760,000,000 | 80,000,000 + 10,000,000 + 710,000,000 + 50,000,000 = 850,000,000 |
| Total assets (USD) | 240,000,000 + 760,000,000 = 1,000,000,000 | 200,000,000 + 850,000,000 = 1,050,000,000 |
| Liquid-assets share | 240,000,000 / 1,000,000,000 × 100 = 24.00% | 200,000,000 / 1,050,000,000 × 100 = 19.05% |
The change is −4.95 percentage points, using the unrounded calculations behind 19.05% − 24.00%. Eligible balances declined while total assets increased. A report that only describes asset growth would miss the simultaneous reduction in available liquid resources.
For operating cash generation rather than a balance-sheet stock, see cash flow to total assets. It answers a different question and needs a period's cash flow statement.
Every asset belongs in exactly one of the included or excluded groups. At June 30, $200,000,000 plus $850,000,000 equals the reported $1,050,000,000 of total assets. Compare that total with the bank's balance sheet, and tie the securities and cash rows to their supporting schedules.
An unreconciled total is a classification problem to resolve before comparing the ratio. Check whether the export contains both individual holdings and a subtotal row. Check whether securities pledged after the reporting date have accidentally been assigned that later status in the earlier quarter.
Availability can change without changing total assets. Suppose treasury confirms release of $20,000,000 of the June pledged securities and those holdings satisfy the Treasury eligibility policy. The reclassification works as follows:
| June counterfactual | Calculation: amounts (USD) and ratios | Result: amounts (USD) and stated units |
|---|---|---|
| Eligible liquid assets (USD) | 200,000,000 + 20,000,000 | 220,000,000 |
| Excluded assets (USD) | 850,000,000 − 20,000,000 | 830,000,000 |
| Total assets (USD) | 220,000,000 + 830,000,000 | 1,050,000,000 |
| Revised share | 220,000,000 / 1,050,000,000 × 100 | 20.95% |
| Increase in share | 20,000,000 / 1,050,000,000 × 100 | 1.90 percentage points |
The bank has not acquired more assets in this variation. A restriction has changed, so a different share meets the numerator definition. Keep the hypothetical release separate from the reported quarter-end calculation.
The Federal Reserve's explanation of the liquidity coverage ratio describes high-quality liquid assets relative to projected net cash outflows during a 30-day stress period. Total assets are not that denominator.
| Measure | Numerator | Denominator | Reporting question |
|---|---|---|---|
| Management liquid-assets share | Assets eligible under the documented policy | Total balance-sheet assets | What share of assets is designated liquid? |
| Regulatory liquidity coverage ratio | HQLA under the applicable regulatory rules | Regulatory stressed net cash outflows | How do qualifying resources compare with stressed outflows? |
Do not label the worked result an LCR or use it as evidence of regulatory compliance. Treasury owns the liquidity classification and availability assessment; finance owns the balance-sheet tie; the appropriate regulatory reporting team owns any applicable regulatory calculation. The broader financial ratios guide provides context for other balance-sheet measures without replacing bank-specific analysis.
Bring your quarterly balance sheet and an asset schedule with the eligibility and restriction classifications supplied by your team. Covirage maps the columns; its tools compute and check the figures, and the external AI model explains the result with every figure traced to its rows. Create a free Covirage account, which takes about a minute, then set up your business and bring a sample of your own data.
See Covirage for commercial banking for the supporting industry context.
No single management definition should be assumed across peer workbooks. Document eligible cash, restrictions, securities, valuation, and encumbrance treatment. Compare banks only after confirming that the supplied numerator schedules follow the same policy and reporting basis.
Under the illustrative policy here, securities pledged against other obligations are excluded from available liquid assets. They remain in total assets. Releasing collateral can change availability, but treasury must confirm the release and any operational restrictions before reclassifying it.
A rising share can provide more readily available resources, but it does not explain deposit stability, funding concentration, or upcoming payments. Examine the reason for the movement and the bank's cash flow projections before making a funding decision.
For a quarterly balance-sheet snapshot, use closing liquid assets and closing total assets from the same date. An average-based management measure can also be useful, but both balances need comparable averaging and the report must identify that different basis.