The Liquidity Coverage Ratio (LCR) is a financial metric that measures a bank's ability to meet its short-term obligations. It requires banks to hold a sufficient amount of high-quality liquid assets (HQLA) that can be quickly converted into cash. The LCR is calculated by dividing the value of these liquid assets by the total net cash outflows expected over a 30-day stress period. Regulated by the Basel III framework, the LCR aims to enhance the stability of financial institutions during times of economic stress. By ensuring that banks maintain adequate liquidity, the LCR helps prevent financial crises and promotes confidence in the banking system.