Explaining the Liquidity Ratio That Is Blocking Lazio’s Incoming Market

Lazio are currently unable to make any new signings due to the now-infamous liquidity ratio, but what actually is that?

Biancocelesti fan and economics expert LeastSquares explained the situation to fan portal LazioLand on Twitter yesterday, laying out what the liquidity ratio is and why it is blocking any new deals.

The Italian football federation has established a “system of economic and financial balance control indicators” for clubs in the top three tiers of the footballing pyramid. The liquidity indicator, alongside the debt indicator and the extended labor cost indicator, all make up this system.

Out of these three indicators, only one of these has a substantial effect on the clubs, the liquidity indicator. This is set by the ratio of current assets and receivables against current liabilities and payables over a 12-month period and essentially measures if short-term commitments can be met without creating debt.

Italian clubs are required to communicate their liquidity indicator to the FIGC twice a year, on 31st March (documents deadline is 31st May) and 30th September (documents deadline is 30th November). This indicator cannot be any lower than a certain threshold set by the FIGC, and failing to reach that threshold has detrimental effects on the following transfer window.

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Failing to hit that threshold forces clubs to have to sell players to make new signings, although there is a way to solve this. The market restrictions are lifted if the club manages to reach the threshold by injecting capital resources.

The distance needed to meet the liquidity indicator threshold is reduced by a third if the club’s debt or extended labor costs indicator are below their threshold value; it is reduced by two-thirds if both aforementioned indicators are below the respective threshold.

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On 9th June this summer the FIGC lowered the liquidity indicator threshold for 31st March 2021 from 0.8 to 0.6. Whilst it’s unknown what Lazio‘s indicator was by that deadline, it was 0.6 in the financial statements in December 2020.

Selling a player like Joaquin Correa this summer would unblock the situation and allow Lazio to begin securing new signings. 

Tags Biancocelesti FIGC Italy Lazio liquidity ratio Norme Organizzative Interne delle FIGC Rome Serie A