Liquidity requirements refer to the regulations that financial institutions must follow to ensure they have enough liquid assets on hand to meet short-term obligations. These requirements are designed to promote stability in the financial system by ensuring that banks can quickly access cash when needed, such as during unexpected withdrawals by customers or financial crises. Typically, liquidity requirements are expressed as a ratio, comparing a bank's liquid assets to its total liabilities. Regulatory bodies, such as the Basel Committee on Banking Supervision, set these standards to help prevent bank failures and maintain public confidence in the banking system.