Loan-to-Deposit Ratio (LDR) Calculator & Liquidity Lab
Model commercial bank structural liquidity, wholesale funding deficits, blended cost of funds, lending headroom, and deposit run stress scenarios.
Bank Liquidity & Balance Sheet Presets
Balance Sheet & Funding Inputs
Enter asset and liability figures in thousands of dollars ($000).
1. Credit & Deposit Base ($000)
2. Secondary Funding & Reserves ($000)
3. Interest Rates & Target Hurdle
Asset-Liability Management (ALM) Diagnostics
| Lending Capacity Headroom: | +$500,000k | Additional lending volume until reaching 85.00% target LDR |
| Wholesale Funding Reliance: | 8.26% | Wholesale borrowings / Total liabilities and deposits |
| Liquid Reserves to Deposit Ratio: | 17.00% | High-Quality Liquid Assets (HQLA) / Customer Deposits |
| Stressed LDR (10% Deposit Run): | 93.33% | LDR if $5,000,000k in core deposits is withdrawn |
| Stressed LDR (20% Deposit Run): | 105.00% | LDR if severe outflow creates structural funding deficit |
| Net Interest Spread: | 4.71% | Loan Yield (6.75%) - Blended Cost of Funds (2.04%) |
Liquidity & Cost of Funds Sensitivity Matrices
Sensitivity Grid 1: Total Loans vs Total Deposits (LDR %)
Evaluates how simultaneous changes in loan originations and customer deposit levels affect balance sheet LDR.
Sensitivity Grid 2: Deposit Outflow Shock vs Wholesale Borrowing Cost (Blended Cost of Funds %)
Simulates margin compression as deposit flight forces the replacement of cheap deposits with high-cost wholesale funds.
Worked Calculation & Mathematical Specification
The Loan-to-Deposit Ratio (LDR) is a fundamental regulatory and supervisory metric used to assess the liquidity profile of commercial banks, credit unions, and depository institutions. It indicates the extent to which illiquid customer loans are funded by sticky, core retail deposits versus volatile wholesale money markets.
$$\text{Loan-to-Deposit Ratio (LDR)} = \frac{\text{Total Loans}}{\text{Total Customer Deposits}} \times 100\%$$
$$\text{Funding Surplus / Deficit} = \text{Total Customer Deposits} - \text{Total Loans}$$
$$\text{Target Lending Runway} = (\text{Customer Deposits} \times \text{Target LDR}) - \text{Current Loans}$$
$$\text{Wholesale Funding Reliance} = \frac{\text{Wholesale Borrowings}}{\text{Customer Deposits} + \text{Wholesale Borrowings}} \times 100\%$$
$$\text{Blended Cost of Funds} = \frac{(\text{Deposits} \times c_D) + (\text{Wholesale Borrowings} \times c_W)}{\text{Deposits} + \text{Wholesale Borrowings}}$$
Step-by-Step Calculation Walkthrough (Current Simulation State)
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Banking Liquidity & ALM Principles
- The Core Deposit Anchor: Core retail deposits represent the cheapest, most stable foundation of a commercial bank balance sheet. When a bank funds 100% of loans with core deposits, its exposure to interbank liquidity freezes is drastically reduced.
- The Peril of High LDR (>100%): Banks operating with LDRs above 100% must fund the excess loans through short-term wholesale credit markets (brokered CDs, FHLB advances, commercial paper, or repo lines). If credit spreads blow out or counterparties pull credit, the bank faces an immediate liquidity crisis.
- Cross-Regulatory Interaction: In addition to LDR, Basel III enforces the Liquidity Coverage Ratio (LCR) (30-day severe stress net outflow coverage) and the Net Stable Funding Ratio (NSFR) (1-year structural duration matching), both of which heavily penalize excessive reliance on short-term wholesale borrowing.
Bank Liquidity & LDR Knowledge Check Quiz
Test your understanding of loan-to-deposit ratios, wholesale funding risks, liquidity buffers, and deposit run contagion.
1. If a commercial bank has $60,000,000,000 in total customer loans and $75,000,000,000 in customer deposits, what is its Loan-to-Deposit Ratio (LDR)?
2. Why do bank regulators and equity analysts view an LDR consistently above 100% as a major vulnerability?
3. What is the financial consequence of an excessively low LDR (e.g., 55%) for a retail depository?
4. During a sudden 15% deposit run at an institution with $100M in loans and $100M in deposits (initial LDR 100%), what happens to its LDR assuming loans cannot be liquidated immediately?
Frequently Asked Questions
What is the Loan-to-Deposit Ratio (LDR) and how is it calculated?
The Loan-to-Deposit Ratio (LDR) measures a bank's total outstanding loans divided by its total customer deposits: LDR = (Total Loans / Customer Deposits) * 100%. It evaluates the bank's structural liquidity by revealing what percentage of customer deposits are tied up in loans versus kept as liquid cash reserves.
What is an ideal Loan-to-Deposit Ratio for a commercial bank?
Bank regulators and credit rating agencies generally consider an LDR between 75% and 85% to be optimal. An LDR below 70% indicates excess liquidity and lazy balance sheet management that depresses net interest margin (NIM). Conversely, an LDR above 95% indicates an aggressive funding posture where loans exceed core deposits, forcing the bank to rely on expensive and volatile wholesale borrowings.
What happens when a bank's LDR exceeds 100%?
When LDR exceeds 100%, the bank has a structural funding gap: it has lent out more money than customer deposits hold. The deficit must be funded through wholesale sources such as Federal Home Loan Bank (FHLB) advances, brokered certificates of deposit (CDs), repurchase agreements (repos), or senior notes. This sharply elevates refinancing and liquidity run risk during banking sector stress.
How does deposit outflow shock affect bank liquidity and LDR?
When depositors withdraw funds during a panic or flight-to-quality, the deposit denominator shrinks while long-dated illiquid loans remain on the balance sheet. For example, a 15% deposit run elevates an 85% LDR bank to 100% LDR, eliminating all liquid reserves and requiring emergency discount window borrowing or distressed asset liquidations.