Annex 4: Illustrative Summary of the LCR
(percentages are factors to be multiplied by the total amount of each item)
| Item | Factor | |
| Stock of HQLA | ||
| A. Level 1 assets: | ||
| • | Coins and bank notes | 100% |
| • | Qualifying marketable securities from sovereigns, central banks, PSEs, and multilateral development banks | |
| • | Qualifying central bank reserves | |
| • | Domestic sovereign or central bank debt for non-0% risk-weighted sovereigns | |
| B. Level 2 assets (maximum of 40% of HQLA): | ||
| Level 2A assets | ||
| • | Sovereign, central bank, multilateral development banks, and PSE assets qualifying for 20% risk weighting | 85% |
| • | Qualifying corporate debt securities rated AA- or higher | |
| • | Qualifying covered bonds rated AA- or higher | |
| Level 2B assets (maximum of 15% of HQLA) | ||
| • | Qualifying RMBS | 75% |
| • | Qualifying corporate debt securities rated between A+ and BBB- | 50% |
| • | Qualifying common equity shares | 50% |
| Total value of stock of HQLA | ||
| Cash Outflows | ||
| A. 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% | |
| B. Unsecured wholesale funding: | ||
| Demand 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% | |
| C. 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 | 25% |
| • | Backed by RMBS eligible for inclusion in Level 2B | 25% |
| • | Backed by other Level 2B assets | 50% |
| • | All other secured funding transactions | 100% |
| D. 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% | |
| ABCP, SIVs, conduits, SPVs, etc: | ||
| • | Liabilities from maturing ABCP, SIVs, SPVs, etc (applied to maturing amounts and returnable assets) | 100% |
| • | 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 | ||