Liquidity & Balance Sheet
Liquid Assets Ratio
Also known as Liquid Assets
The liquid assets ratio measures cash and readily marketable securities as a percentage of total assets — the on-balance-sheet cushion a bank can tap quickly to meet deposit outflows without fire-selling loans.
Formula
Cash and balances due from depository institutions plus unencumbered, marketable securities, divided by total assets.
Why it matters
The 2023 regional-bank failures were liquidity events: solvent-looking banks could not meet rapid uninsured-deposit outflows. The liquid assets ratio is a first-order gauge of how much a bank can pay out before it must borrow or sell loans at a loss.
How to interpret
Higher is safer but lower-yielding. Most banks run 10–25%. Below ~8% a bank is thinly cushioned and depends on wholesale borrowing in a stress; read alongside the uninsured-deposit ratio and wholesale-funding ratio to judge true liquidity resilience.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| > 20% | Strong cushion | Ample on-hand liquidity for stress outflows. |
| 10–20% | Adequate | Normal range for most commercial banks. |
| 5–10% | Thin | Limited buffer; reliant on borrowing under stress. |
| < 5% | Concern | Minimal on-hand liquidity; high run-risk sensitivity. |
Worked example
Frequently asked
Why did liquidity matter so much in 2023?
Silicon Valley Bank and others failed when uninsured depositors withdrew faster than the banks could raise cash, forcing securities sales at large unrealized losses. A higher liquid assets ratio — especially in unpledged, short-duration securities — reduces that vulnerability.
Do pledged securities count as liquid?
No. Securities pledged as collateral (for example, to the FHLB or for public deposits) are encumbered and cannot be sold to raise cash, so a careful liquid assets measure excludes them.
Sources
- FFIEC Call Report Schedule RC (Balance Sheet)
- FFIEC UBPR Liquidity section
See Liquid Assets across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by Liquid Assets, refreshed quarterly within 48 hours of FFIEC release.