It stands for macro-prudential liquidity buffer; a liquidity-based measure (liquidity buffer)- and broadly, a stability measure or macro-prudential policy instrument– that aims to address systemic liquidity risk. It is a countercyclical tool used to control banks’ liquidity procyclical behavior, i.e., in order to manage speculation or excessive risk taking due to availability of excess liquidity as well as to create better liquidity flexibility for banks at times of financial stress or crisis.

This buffer is defined as a minimum liquidity reserve that must be maintained by banks operating in a banking system in the form of securities (eligible securities) that can be used in monetary operations.

In general, liquidity buffers refer to banks’ stock or holdings of liquid assets, such as central bank reserves or high-grade government debt that can be easily used to settle obligations on due dates. These buffers include liquid assets used to meet specific liquidity measures such as the liquidity coverage ratio (LCR) as well as additional bank-specific measures.

The MPLB level can be adjusted based on the credit cycle, complementary to the countercyclical capital buffer (CCB).