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This chapter summarises the components of high-quality liquid assets and the run-off factors applied to cash outflows and additional requirements under the Liquidity Coverage Ratio.

Effective as of: 15 Dec 2019 | Last update: 15 Dec 2019
Status: Current (View changes)
99.1

The table below summarises the Liquidity Coverage Ratio (LCR; percentages are factors to be multiplied by the total amount of each item).

Item

Factor

Stock of high-quality liquid assets (HQLA)

  1. Level 1 assets

- Coins and bank notes

- Qualifying marketable securities from sovereigns, central banks, public sector entities (PSEs) and multilateral development banks

- Qualifying central bank reserves

- Domestic sovereign or central bank debt for non-0% risk-weighted sovereigns

100%

  1. Level 2 assets (maximum 40% of HQLA)

Level 2A assets:

- Sovereign, central bank, multilateral development banks and PSE assets qualifying for 20% risk weighting

- Qualifying corporate debt securities rated AA- or higher

- Qualifying covered bonds rated AA- or higher

85%

Level 2B assets (maximum of 15% of HQLA)

- Qualifying residential mortgage-backed securities (RMBS)

75%

- Qualifying corporate debt securities rated between A+ and BBB-

- Qualifying common equity shares

- Sovereign, central bank and PSE debt securities rated BBB- or higher that do not qualify as a Level 1 or Level 2A asset.

50%

Total value of stock of HQLA

Cash outflows

  1. Retail deposits

Demand deposits and term deposits (less than 30 days maturity):

- Stable deposits (deposit insurance scheme meets additional criteria)

3%

- Stable deposits

5%

- Less stable retail deposits

10%

Term deposits with residual maturity greater than 30 days

0%

  1. Unsecured wholesale funding

Demand deposits and term deposits (less than 30 days maturity) provided by small business customers:

- Stable deposits

5%

- Less stable deposits

10%

Operational deposits generated by clearing, custody and cash management activities

25%

- Portion covered by deposit insurance

5%

Cooperative banks in an institutional network (qualifying deposits with the centralised institution)

25%

Non-financial corporates, sovereigns, central banks, multilateral development banks and PSEs

40%

- If the entire amount fully covered by deposit insurance scheme

20%

Other legal entity customers

100%

  1. Secured funding

- Secured funding transactions with a central bank counterparty or backed by Level 1 assets with any counterparty

0%

- Secured funding transactions backed by Level 2A assets, with any counterparty

15%

- Secured funding transactions backed by non-Level 1 or non-Level 2A assets, with domestic sovereigns, multilateral development banks, or domestic PSEs as a counterparty

- Backed by RMBS eligible for inclusion in Level 2B

25%

- Backed by other Level 2B assets

50%

- All other secured funding transactions

100%

  1. Additional requirements

Liquidity needs (eg collateral calls) related to financing transactions, derivatives and other contracts

3 notch downgrade

Market valuation changes on derivatives transactions (largest absolute net 30-day collateral flows realised during the preceding 24 months)

Look-back approach

Valuation changes on non-Level 1 posted collateral securing derivatives

20%

Excess collateral held by a bank related to derivative transactions that could contractually be called at any time by its counterparty

100%

Liquidity needs related to collateral contractually due from the reporting bank on derivatives transactions

100%

Increased liquidity needs related to derivative transactions that allow collateral substitution to non-HQLA assets

100%

Asset-backed commercial paper (ABCP), structured investment vehicles (SIVs), conduits, special purpose entities (SPEs) etc:

- Liabilities from maturing ABCP, SIVs, SPEs etc (applied to maturing amounts and returnable assets)

- Asset-backed securities (including covered bonds) applied to maturing amounts

100%

Currently undrawn committed credit and liquidity facilities provided to:

- Retail and small business clients

5%

- Non-financial corporates, sovereigns and central banks, multilateral development banks and PSEs

10% for credit

30% for liquidity

- Banks subject to prudential supervision

40%

- Other financial institutions (include securities firms, insurance companies)

40% for credit

100% for liquidity

- Other legal entity customers, credit and liquidity facilities

100%

Other contingent funding liabilities (such as guarantees, letters of credit, revocable credit and liquidity facilities etc)

National discretion

- Trade finance

0-5%

- Customer short positions covered by other customers’ collateral

50%

Any additional contractual outflows

100%

Net derivative cash outflows

100%

Any other contractual cash outflows

100%

Total cash outflows

Cash inflows

Maturing secured lending transactions backed by the following collateral:

Level 1 assets

0%

Level 2A assets

15%

Level 2B assets

- Eligible RMBS

25%

- Other assets

50%

Margin lending backed by all other collateral

50%

All other assets

100%

Credit or liquidity facilities provided to the reporting bank

0%

Operational deposits held at other financial institutions (include deposits held at centralised institution of network of co-operative banks)

0%

Other inflows by counterparty:

- Amounts to be received from retail counterparties

50%

- Amounts to be received from non-financial wholesale counterparties, from transactions other than those listed in above inflow categories

50%

- Amounts to be received from financial institutions and central banks, from transactions other than those listed in above inflow categories.

100%

Net derivative cash inflows

100%

Other contractual cash inflows

National discretion

Total cash inflows

Total net cash outflows = Total cash outflows minus min [total cash inflows, 75% of gross outflows]

LCR = Stock of HQLA / Total net cash outflows