In general, all assets of companies and banks that are readily saleable and, therefore, can be easily converted into cash in the event of a financial crisis. – In the course of the financial crisis that followed the subprime crisis, it suddenly became apparent that the decisive bottleneck factor in the financial market was not primarily capital, but the possibility of selling assets and turning them into cash in the face of unfavorable market conditions (to monetize: to convert an asset into currency). This experience led to a basic rethinking: It is no longer the amount of assets alone that is regarded as the decisive factor. Rather, their degree of liquidity is also considered to be of equal importance. Since then, companies, banks and domestic and international supervisory authorities have been endeavoring to ensure the ability to fulfill payment obligations at all times through constantly available payment reserves as well as appropriate and sufficient refinancing possibilities, even in times of stress on the financial market. – In the case of a private household, sometimes referred to as the ability to overdraw the (salary) account informally and thus to draw on an overdraft facility. – See acid ratio, Basel III, capital, funding ratio, medium-term, financial strength, liquidation, counterparty, central, trading platform, trading facility, multilateral, capital buffer, countercyclical, core capital, liquidity maturity balance sheet, liquidity requirements vis-à-vis assets, liquidity coverage ratio, liquidity crisis plan, liquidity management, liquidity ratio, structural, liquidity reserve, liquidity risk, liquidity regulation, quick ratio, stock approach, scenarios, exceptional stress test, forced convertible bond.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/