*Refer to SAMA Circular 440471440000, Basel III Reforms.

For non-0% risk-weighted sovereigns:

sovereign or central bank debt securities issued in domestic currency by the sovereign or central bank in the country in which the liquidity risk is taken or in the bank's home country

*Refer to SAMA Circular 440471440000, Basel III Reforms.

Non-financial corporate bonds:

Any surplus of liquid assets held at the legal entity that is excluded (i.e. not reported in lines above) from the consolidated stock because of reasonable doubts that they would be freely available to the consolidated (parent) entity in times of stress. Eligible liquid assets that are held by a legal entity being consolidated to meet its local LCR requirements (where applicable) can be included in the consolidated LCR to the extent that such liquid assets are used to cover the total net cash outflows of that entity, notwithstanding that the assets are subject to liquidity transfer restrictions. If the liquid assets held in excess of the total net cash outflows of the legal entity are not transferable, such surplus liquidity should be excluded from the standard and reported in this line. For practical reasons, the liquidity transfer restrictions to be accounted for in the consolidated ratio are confined to existing restrictions imposed under applicable laws, regulations and supervisory requirements.

Banks should report the market value of Level 1 assets excluded in column D, the market value of Level 2A assets excluded in column E, the market value of Level 2B RMBS assets excluded in column F and the market value of Level 2B non-RMBS assets excluded in column G.

A)e) Treatment for jurisdictions with insufficient HQLA

Please refer to the instructions from your supervisor for the specification of this subsection. (Note below)

Some jurisdictions may not have sufficient supply of Level 1 assets (or both Level 1 and Level 2 assets) in their domestic currency to meet the aggregate demand of banks with significant exposures in this currency (note that an insufficiency in Level 2 assets alone does not qualify for the alternative treatment). To address this situation, the Committee has developed alternative treatments for the holdings in the stock of HQLA, which are expected to apply to a limited number of currencies and jurisdictions.

Eligibility for such alternative treatment will be judged on the basis of qualifying criteria set out in Annex 2 of the Basel III LCR standards and will be determined through an independent peer review process overseen by the Committee. The purpose of this process is to ensure that the alternative treatments are only used when there is a true shortfall in HQLA in the domestic currency relative to the needs in that currency.

There are three potential options for this treatment (line items 67 to 71). If your supervisor intends to adopt this treatment, it is expected that they provide specific instructions to the banks under its supervision for reporting the relevant information under the option it intends to use. To avoid double-counting, if an asset has already been included in the eligible stock of HQLA, it should not be reported under these options.

Option 1 – Contractual committed liquidity facilities from the relevant central bank, with a fee. These facilities should not be confused with regular central bank standing arrangements. In particular, these facilities are contractual arrangements between the central bank and the commercial bank with a maturity date which, at a minimum, falls outside the 30-day LCR window. Further, the contract must be irrevocable prior to maturity and involve no ex-post credit decision by the central bank.

Such facilities are only permissible if there is also a fee for the facility which is charged regardless of the amount, if any, drawn down against that facility and the fee is set so that banks which claim the facility line to meet the LCR, and banks which do not, have similar financial incentives to reduce their exposure to liquidity risk. That is, the fee should be set so that the net yield on the assets used to secure the facility should not be higher than the net yield on a representative portfolio of Level 1 and Level 2 assets, after adjusting for any material differences in credit risk.

Option 2 – Foreign currency HQLA to cover domestic currency liquidity needs

For currencies that do not have sufficient HQLA, supervisors may permit banks that evidence a shortfall of HQLA in the domestic currency (which would match the currency of the underlying risks) to hold HQLA in a currency that does not match the currency of the associated liquidity risk, provided that the resulting currency mismatch positions are justifiable and controlled within limits agreed by their supervisors.

To account for foreign exchange risk associated with foreign currency HQLA used to cover liquidity needs in the domestic currency, such liquid assets should be subject to a minimum haircut of 8% for major currencies that are active in global foreign exchange markets. For other currencies, supervisors should increase the haircut to an appropriate level on the basis of historical (monthly) exchange rate volatilities between the currency pair over an extended period of time.

If the domestic currency is formally pegged to another currency under an effective mechanism, the haircut for the pegged currency can be lowered to a level that reflects the limited exchange rate risk under the peg arrangement. Haircuts for foreign currency HQLA used under Option 2 would apply only to HQLA in excess of a threshold specified by supervisors which is not greater than 25% that are used to cover liquidity needs in the domestic currency.

Option 3 – Additional use of Level 2 assets with a higher haircut

This option addresses currencies for which there are insufficient Level 1 assets, as determined by the qualifying principles and criteria, but where there are sufficient Level 2A assets. In this case, supervisors may choose to allow banks that evidence a shortfall of liquid assets in the domestic currency (to match the currency of the liquidity risk incurred) to hold additional Level 2A assets in the stock. These additional Level 2A assets should be subject to a minimum 20% – i.e. 5% higher than the 15% haircut applicable to Level 2A assets that are included in the 40% cap. Any Level 2B assets held by the bank would remain subject to the cap of 15%, regardless of the amount of other Level 2 assets held.

6.1.2 Outflows, Liquidity Coverage Ratio (LCR) (panel B1)

This section calculates the total expected cash outflows in the LCR stress scenario for the subsequent 30 calendar days. They are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or to be drawn down (Basel III LCR standards paragraph 69).

Where there is potential that an item could be reported in multiple outflow categories, (e.g. committed liquidity facilities granted to cover debt maturing within the 30 calendar day period), a bank only has to assume up to the maximum contractual outflow for that product (Basel III LCR standards paragraph 72).

a) Retail deposit run-off

Retail deposits are defined as deposits placed with a bank by a natural person. Deposits from legal entities, sole proprietorships and partnerships are captured in wholesale deposit categories. Retail deposits reported in lines 87 to 104 include demand deposits and term deposits maturing in or with a notice period up to 30 days. Term deposits with a residual contractual maturity greater than 30 days which may be withdrawn within 30 days without entailing a significant withdrawal penalty materially greater than the loss of interest, should be considered to mature within the 30-day horizon and should also be included in lines 87 to 104 as appropriate. If a portion of the term deposit can be withdrawn without incurring such a penalty, only that portion should be treated as a demand deposit. The remaining balance of the deposit should be treated as a term deposit.

Notes, bonds and other debt securities sold exclusively to the retail market and held in retail accounts can be reported in the appropriate retail deposit category (Basel III LCR standards paragraph 110). To be treated in this manner, it is not sufficient that the debt instruments are specifically designed and marketed to retail customers. Rather there should be limitations placed such that those instruments cannot be bought and held by parties other than retail customers. Per paragraph 76 of the Basel III LCR standards, an “effective deposit insurance scheme” refers to a scheme (i) that guarantees that it has the ability to make prompt payouts, (ii) for which the coverage is clearly defined and (iii) of which public awareness is high. The deposit insurer in an effective deposit insurance scheme has formal legal powers to fulfill its mandate and is operationally independent, transparent and accountable. A jurisdiction with an explicit and legally binding sovereign deposit guarantee that effectively functions as deposit insurance can be regarded as having an effective deposit insurance scheme.

b) Unsecured wholesale funding run-off

Unsecured wholesale funding is defined as liabilities and general obligations that are raised from non-natural persons (i.e. legal entities, including sole proprietorships and partnerships) and are not collateralized by legal rights to specifically designated assets owned by the borrowing institution in the case of bankruptcy, insolvency, liquidation or resolution, excluding derivatives.

Wholesale funding included in the LCR is defined as all funding that is callable within the LCR's 30-day horizon or that has its earliest possible contractual maturity date within this horizon (such as maturing term deposits and unsecured debt securities) as well as funding with an undetermined maturity. This includes all funding with options that are exercisable at the investor's discretion within the 30-day horizon. It also includes funding with options exercisable at the bank's discretion where the bank's ability not to exercise the option is limited for reputational reasons. In particular, where the market expects certain liabilities to be redeemed before their legal final maturity date and within the 30-day horizon, such liabilities should be included in the appropriate outflows category.

Small business customers

Unsecured wholesale funding provided by small business customers consists of deposits and other extensions of funds made by non-financial small business customers. “Small business customers” are defined in line with the definition of loans extended to small businesses in paragraph 231 of the Basel II framework that are managed as retail exposures and are generally considered as having similar liquidity risk characteristics to retail accounts, provided the total aggregated funding raised from the small business customer is less than €1 million (on a consolidated basis where applicable) (Basel III LCR standards paragraph 90).

“Aggregated funding” means the gross amount (i.e. not netting any form of credit extended to the legal entity) of all forms of funding (e.g. deposits or debt securities or similar derivative exposure for which the counterparty is known to be a small business customer) (Basel III LCR standards footnote 41).

Applying the limit on a consolidated basis means that where one or more small business customers are affiliated with each other, they may be considered as a single creditor such that the limit is applied to the total funding received by the bank from this group of customers (Basel III LCR standards footnote 41).

Where a bank does not have any exposure to a small business customer that would enable it to use the definition under paragraph 231 of the Basel II Framework, the bank may include such a deposit in this category provided that the total aggregate funding raised from the customer is less than €1 million (on a consolidated basis where applicable) and the deposit is managed as a retail deposit. This means that the bank treats such deposits in its internal risk management systems consistently over time and in the same manner as other retail deposits, and that the deposits are not individually managed in a way comparable to larger corporate deposits.

Term deposits from small business customers with a residual contractual maturity of greater than 30 days which can be withdrawn within 30 days without a significant withdrawal penalty materially greater than the loss of interest should be considered to fall within the 30-day horizon and should also be included in lines 116 to 133 as appropriate. If a portion of the term deposit can be withdrawn without incurring such a penalty, only that portion should be treated as a demand deposit. The remaining balance of the deposit should be treated as a term deposit.

Unsecured wholesale funding generated by clearing, custody and cash management activities (“operational deposits”):

Reported in lines 140 to 153 are portions of deposits and other extensions of funds from financial and non-financial wholesale customers (excluding deposits less than €1 million from small business customers which are reported in lines 116 to 136) generated out of clearing, custody and cash management activities (“operational deposits”). These funds may receive a 25% run-off factor only if the customer has a substantive dependency with the bank and the deposit is required for such activities.

Qualifying activities in this context refer to clearing, custody or cash management activities that meet the following criteria:

• The customer is reliant on the bank to perform these services as an independent third party intermediary in order to fulfill its normal banking activities over the next 30 days. For example, this condition would not be met if the bank is aware that the customer has adequate back-up arrangements.
• These services must be provided under a legally binding agreement to institutional customers.
• The termination of such agreements shall be subject either to a notice period of at least 30 days or significant switching costs (such as those related to transaction, information technology, early termination or legal costs) to be borne by the customer if the operational deposits are moved before 30 days.

Qualifying operational deposits generated by such an activity are ones where:

• The deposits are by-products of the underlying services provided by the banking organization and not sought out in the wholesale market in the sole interest of offering interest income.
• The deposits are held in specifically designated accounts and priced without giving an economic incentive to the customer (not limited to paying market interest rates) to leave any excess funds on these accounts. In the case that interest rates in a jurisdiction are close to zero, it would be expected that such accounts is non-interest bearing.

Any excess balances that could be withdrawn and would still leave enough funds to fulfill these clearing, custody and cash management activities do not qualify for the 25% factor. In other words, only that part of the deposit balance with the service provider that is proven to serve a customer's operational needs can qualify as stable. Excess balances should be treated in the appropriate category for non-operational deposits. If banks are unable to determine the amount of the excess balance, then the entire deposit should be assumed to be excess to requirements and, therefore, considered non-operational.

Deposits arising out of correspondent banking or from the provision of prime brokerage services (as defined in Basel III LCR standards footnote 42) should not be reported in these lines rather as non-operational deposits in lines 156 to 163 as appropriate (Basel III LCR standards paragraph 99) and lines 169 and 171, respectively.

A clearing relationship, in this context, refers to a service arrangement that enables customers to transfer funds (or securities) indirectly through direct participants in domestic settlement systems to final recipients. Such services are limited to the following activities: transmission, reconciliation and confirmation of payment orders; daylight overdraft, overnight financing and maintenance of post-settlement balances; and determination of intra-day and final settlement positions. (Basel III LCR standards, paragraph 101)

A custody relationship, in this context, refers to the provision of safekeeping, reporting, processing of assets or the facilitation of the operational and administrative elements of related activities on behalf of customers in the process of their transacting and retaining financial assets. Such services are limited to the settlement of securities transactions, the transfer of contractual payments, the processing of collateral, and the provision of custody related cash management services. Also included are the receipt of dividends and other income, client subscriptions and redemptions. Custodial services can furthermore extend to asset and corporate trust servicing, treasury, escrow, funds transfer, stock transfer and agency services, including payment and settlement services (excluding correspondent banking), and depository receipts. (Basel III LCR standards, paragraph 102)

A cash management relationship, in this context, refers to the provision of cash management and related services to customers. Cash management services, in this context, refers to those products and services provided to a customer to manage its cash flows, assets and liabilities, and conduct financial transactions necessary to the customer's ongoing operations. Such services are limited to payment remittance, collection and aggregation of funds, payroll administration, and control over the disbursement of funds. (Basel III LCR standards, paragraph 103)

Non-operational deposits in lines 156 to 163 include all deposits and other extensions of unsecured funding not included under operational deposits in lines 140 to 153, excluding notes, bonds and other debt securities, covered bond issuance or repo and secured funding transactions (reported below). Deposits arising out of correspondent banking or from the provision of prime brokerage services (as defined in the Basel III LCR standards, footnote 42) should not be included in these lines (Basel III LCR standards, paragraph 99).

Customer cash balances arising from the provision of prime brokerage services, including but not limited to the cash arising from prime brokerage services as identified in Basel III LCR standards, paragraph 99, should be considered separate from any required segregated balances related to client protection regimes imposed by national regulations, and should not be netted against other customer exposures included in this standard. These offsetting balances held in segregated accounts are treated as inflows in Basel III LCR standards, paragraph 154 and should be excluded from the stock of HQLA (Basel III LCR standards, paragraph 111).

An institutional network of cooperative (or otherwise named) banks is a group of legally autonomous banks with a statutory framework of cooperation with common strategic focus and brand where specific functions are performed by central institutions or specialized service providers. Central institutions or specialized central service providers of such networks should report in this line the amount of deposits placed by network member institutions (that are not reported in line items 148 or 149 and that are) (a) due to statutory minimum deposit requirements which are registered at regulators or (b) in the context of common task sharing and legal, statutory or contractual arrangements so long as both the bank that has received the monies and the bank that has deposited participate in the same institutional network's mutual protection scheme against illiquidity and insolvency of its members.

Deposits from network member institutions that are neither included in line items 148 or 149, nor placed for purposes as referred to in letters (a) and (b) above, are to be reported in line items 162 or 163.

Banks that are not the central institutions or specialized central service provider of such network should report zero in this line.

Amounts in accounts with a clearing, custody or cash management relationship but which have been excluded from the operational deposit category because the account is a correspondent banking account.

Correspondent banking refers to arrangements under which one bank (correspondent) holds deposits owned by other banks (respondents) and provides payment and other services in order to settle foreign currency transactions (e.g. so-called nostro and vostro accounts used to settle transactions in a currency other than the domestic currency of the respondent bank for the provision of clearing and settlement of payments).

Amounts in accounts with a clearing, custody or cash management relationship but which have been excluded from the operational deposit category because the account holder is a prime brokerage client of the reporting institution.

Prime brokerage is a package of services offered to large active investors, particularly hedge funds.

c) Secured funding run-off

Secured funding is defined as those liabilities and general obligations that are collateralized by legal rights to specifically designated assets owned by the borrowing institution in the case of bankruptcy, insolvency, liquidation or resolution. In this section any transaction in which the bank has received a collateralized loan in cash, such as repo transactions, expiring within 30 days should be reported. Collateral swaps where the bank receives a collateralized loan in the form of other assets than cash, should not be reported here, but in panel C below.

Additionally, collateral lent to the bank's customers to affect short positions should be treated as a form of secured funding. A customer short position in this context describes a transaction where a bank's customer sells a security it does not own, and the bank subsequently obtains the same security from internal or external sources to make delivery into the sale. Internal sources include the bank's own inventory of collateral as well as rehypothecatable Level 1 or Level 2 collateral held in other customer margin accounts. The contingent risk associated with non-contractual obligations where customer short positions are covered by other customers’ collateral that does not qualify as Level 1 or Level 2 should be reported in line 263. External sources include collateral obtained through a securities borrowing, reverse repo, or like transaction.

If the bank has deposited both liquid and non-liquid assets in a collateral pool and no assets are specifically assigned as collateral for the secured transaction, the bank may assume for this monitoring exercise that the assets with the lowest liquidity get assigned first: assets that are not eligible for the stock of liquid assets are assumed to be assigned first. Only once all those assets are fully assigned should Level 2B assets be assumed to be assigned, followed by Level 2A assets. Only once all Level 2 assets are assigned should Level 1 assets be assumed to be assigned.

A bank should report all outstanding secured funding transactions with remaining maturities within the 30 calendar day stress horizon, including customer short positions that do not have a specified contractual maturity. The amount of funds raised through the transaction should be reported in column D (“amount received”). The value of the underlying collateral extended in the transaction should be reported in column E (“market value of extended collateral”). Both values are needed to calculate the caps on Level 2 and Level 2B assets and both should be calculated at the date of reporting, not the trade or settlement date of the transaction.

Please refer to the instructions from your supervisor for the specification of items related to Level 2B assets in this subsection.

In column D: Amount raised in secured funding or repo transactions with the bank's domestic central bank that mature within 30 days.

In column E: The market value of the collateral extended on these transactions.

In column D: Amount raised in secured funding or repo transactions with the bank's domestic central bank that mature within 30 days and are backed by Level 1 assets.

In column E: The market value of the Level 1 asset collateral extended on these transactions.

In column D: Of the amount reported in line 174, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 1 assets where these assets would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (if they were not already securing the particular transaction in question), because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 1 asset collateral extended on these transactions.

In column D: Amount raised in secured funding or repo transactions with the bank's domestic central bank that mature within 30 days and are backed by Level 2A assets.

In column E: The market value of the Level 2A asset collateral extended on these transactions.

In column D: Of the amount reported in line 181, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2A assets where these assets would otherwise qualify to be reported in panel Ab of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2A asset collateral extended on these transactions.

In column D: Of the amount reported in line 184, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2B RMBS assets where these assets would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2B RMBS asset collateral extended on these transactions.

In column D: Of the amount reported in line 187, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2B non-RMBS assets where these assets would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2B non-RMBS asset collateral extended on these transactions.

In column D: Amount raised on secured funding or repo transactions with the bank's domestic central bank that mature within 30 days and are backed by all other assets (i.e. other than Level 1 or Level 2 assets).

In column E: The market value of the other asset collateral extended on these transactions.

In column D: Of the amount reported in line 191, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 1 assets where these assets would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (if they were not already securing the particular transaction in question), because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 1 asset collateral extended on these transactions.

In column D: Amount raised in secured funding or repo transactions that are not conducted with the bank's domestic central bank and that mature within 30 days and are backed by Level 2A assets.

In column E: The market value of the Level 2A asset collateral extended on these transactions.

In column D: Of the amount reported in line 194, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2A assets where these assets would otherwise qualify to be reported in panel Ab of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2A asset collateral extended on these transactions.

In column D: Amount raised in secured funding or repo transactions that are not conducted with the bank's domestic central bank and that mature within 30 days and are backed by Level 2B RMBS assets.

In column E: The market value of the Level 2B RMBS asset collateral extended on these transactions.

In column D: Of the amount reported in line 197, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2B RMBS assets where these assets would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2B RMBS asset collateral extended on these transactions.

In column D: Amount raised in secured funding or repo transactions that are not conducted with the bank's domestic central bank and that mature within 30 days and are backed by Level 2B non-RMBS assets.

In column E: The market value of the Level 2B non-RMBS asset collateral extended on these transactions.

In column D: Secured funding transactions with domestic sovereign, multilateral development banks or domestic PSEs that are backed by Level 2B non-RMBS assets.

PSEs that receive this treatment should be limited to those that are 20% or lower risk weighted.

In column E: The market value of collateral extended on these transactions.

In column D: Of the amount reported in line 201, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2B non-RMBS assets where these assets would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2B non-RMBS asset collateral extended on these transactions.

In column D: Secured funding transactions with counterparties other than domestic sovereign, multilateral development banks or domestic PSEs with a 20% risk weight that are backed by Level 2B non-RMBS assets.

In column E: The market value of collateral extended on these transactions.

In column D: Of the amount reported in line 204, that which is raised in secured funding or repo transactions that mature within 30 days and are backed by Level 2B non-RMBS assets where these assets would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (if they were not already securing the particular transaction in question) because:

(i) they would be held unencumbered; and

(ii) they would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column E: The market value of the Level 2B non-RMBS asset collateral extended on these transactions.

In column D: Amount raised in secured funding or repo transactions that are not conducted with the bank's domestic central bank and that mature within 30 days and are backed by other assets (non-HQLA).

In column E: The market value of the other (non-HQLA) asset collateral extended on these transactions.

In column D: Secured funding transactions with domestic sovereign, multilateral development banks or domestic PSEs that are backed by other assets (non-HQLA).

PSEs that receive this treatment should be limited to those that are 20% or lower risk weighted.

In column E: The market value of collateral extended on these transactions.

In column D: Secured funding transactions with counterparties other than domestic sovereign, multilateral development banks or PSEs that are backed by other assets (non-HQLA).

In column E: The market value of collateral extended on these transactions.

Banks should calculate, in accordance with their existing valuation methodologies, expected contractual derivative cash inflows and outflows. Cash flows may be calculated on a net basis (i.e. inflows can offset outflows) by counterparty, only where a valid master netting agreement exists. The sum of all net cash outflows should be reported here. The sum of all net cash inflows should be reported in line 315.

Banks should exclude from such calculations those liquidity requirements that would result from increased collateral needs due to market value movements (to be reported in line 221) or falls in value of collateral posted (reported in line 216 and line 217). Options should be assumed to be exercised when they are ‘in the money’ to the option buyer.

Where derivative payments are collateralized by HQLA, cash outflows should be calculated net of any corresponding cash or collateral inflows that would result, all other things being equal, from contractual obligations for cash or collateral to be provided to the bank, if the bank is legally entitled and operationally capable to re-use the collateral in new cash raising transactions once the collateral is received. This is in line with the principle that banks should not double count liquidity inflows and outflows.

Note that cash flows do not equal the marked-to-market value, since the marked-to-market value also includes estimates for contingent inflows and outflows and may include cash flows that occur beyond the 30-day horizon.

It is generally expected that a positive amount would be provided for both this line item and line 315 for institutions engaged in derivatives transactions.

(100% of the amount of collateral that would be posted for, or contractual cash outflows associated with, any downgrade up to and including a 3-notch downgrade). Often, contracts governing derivatives and other transactions have clauses that require the posting of additional collateral, drawdown of contingent facilities, or early repayment of existing liabilities upon the bank's downgrade by a recognized credit rating organization. The scenario therefore requires that for each contract in which “downgrade triggers” exist, the bank assumes that 100% of this additional collateral or cash outflow will have to be posted for any downgrade up to and including a 3-notch downgrade of the bank's long-term credit rating. Triggers linked to a bank's short-term rating should be assumed to be triggered at the corresponding long-term rating in accordance with published ratings criteria. The impact of the downgrade should consider impacts on all types of margin collateral and contractual triggers which change rehypothecation rights for non-segregated collateral.

(Refer to Paragraph 118 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Increased liquidity needs related to the potential for valuation changes on posted collateral securing derivative and other transactions: (20% of the value of non-Level 1 posted collateral).

Observation of market practices indicates that most counterparties to derivatives transactions typically are required to secure the mark-to-market valuation of their positions and that this is predominantly done using cash or sovereign, central bank, multilateral development banks, or PSE debt securities with a 0% risk weight under the *Basel II 62 standardized approach. When these Level 1 liquid asset securities are posted as collateral, the framework will not require that an additional stock of HQLA be maintained for potential valuation changes. If however, counterparties are securing mark-to-market exposures with other forms of collateral, to cover the potential loss of market value on those securities, 20% of the value of all such posted collateral, net of collateral received on a counterparty basis (provided that the collateral received is not subject to restrictions on reuse or rehypothecation) will be added to the stock of required HQLA by the bank posting such collateral. This 20% will be calculated based on the notional amount required to be posted as collateral after any other haircuts have been applied that may be applicable to the collateral category. Any collateral that is in a segregated margin account can only be used to offset outflows that are associated with payments that are eligible to be offset from that same account.

(Refer to Paragraph 119 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

*Refer to SAMA Circular 440471440000, Basel III Reforms.

Loss of funding on asset-backed securities (To the extent that sponsored conduits/SPVs are required to be consolidated under liquidity requirements, their assets and liabilities will be taken into account. Supervisors need to be aware of other possible sources of liquidity risk beyond that arising from debt maturing within 30 days.) covered bonds and other structured financing instruments: The scenario assumes the outflow of 100% of the funding transaction maturing within the 30-day period, when these instruments are issued by the bank itself (as this assumes that the re-financing market will not exist).

(Refer to Paragraph 124 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All funding on asset-backed commercial paper, conduits, securities investment vehicles and other such financing facilities maturing or returnable within 30 days. Banks having structured financing facilities that include the issuance of short-term debt instruments, such as asset backed commercial paper, should report the potential liquidity outflows from these structures. These include, but are not limited to, (i) the inability to refinance maturing debt, and (ii) the existence of derivatives or derivative-like components contractually written into the documentation associated with the structure that would allow the “return” of assets in a financing arrangement, or that require the original asset transferor to provide liquidity, effectively ending the financing arrangement ("liquidity puts") within the 30-day period. Where the structured financing activities are conducted through a special purpose entity (such as a special purpose vehicle, conduit or SIV), the bank should, in determining the HQLA requirements, look through to the maturity of the debt instruments issued by the entity and any embedded options in financing arrangements that may potentially trigger the “return” of assets or the need for liquidity, irrespective of whether or not the SPV is consolidated.

Note; A special purpose entity (SPE) is defined in the Basel II Framework (paragraph 552) as a corporation, trust, or other entity organized for a specific purpose, the activities of which are limited to those appropriate to accomplish the purpose of the SPE, and the structure of which is intended to isolate the SPE from the credit risk of an originator or seller of exposures. SPEs are commonly used as financing vehicles in which exposures are sold to a trust or similar entity in exchange for cash or other assets funded by debt issued by the trust.

(Refer to footnote 50 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Credit and liquidity facilities are defined as explicit contractual agreements or obligations to extend funds at a future date to retail or wholesale counterparties. For the purpose of the standard, these facilities only include contractually irrevocable (“committed”) or conditionally revocable agreements to extend funds in the future (Basel III LCR standards, paragraph 126). These off-balance sheet facilities or funding commitments can have long or short-term maturities, with short-term facilities frequently renewing or automatically rolling-over. In a stressed environment, it will likely be difficult for customers drawing on facilities of any maturity, even short-term maturities, to be able to quickly pay back the borrowings. Therefore, for purposes of this standard, all facilities that are assumed to be drawn (as outlined in the paragraphs below) will remain outstanding at the amounts assigned throughout the duration of the test, regardless of maturity.

(Refer to Paragraph 126 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Unconditionally revocable facilities that are unconditionally cancellable by the bank (in particular, those without a precondition of a material change in the credit condition of the borrower) are excluded from this section and should be reported in lines 249 to 261, as appropriate (Basel III LCR standards, paragraph 126).

The currently undrawn portion of these facilities should be reported. The reported amount may be net of any HQLAs eligible for the stock of HQLAs, if the HQLAs have already been posted as collateral by the counterparty to secure the facilities or that are contractually obliged to be posted when the counterparty will draw down the facility (e.g. a liquidity facility structured as a repo facility), if the bank is legally entitled and operationally capable to re-use the collateral in new cash raising transactions once the facility is drawn, and there is no undue correlation between the probability of drawing the facility and the market value of the collateral. The collateral can be netted against the outstanding amount of the facility to the extent that this collateral is not already counted in the stock of HQLAs (Basel III LCR standards, paragraph 127).

A liquidity facility is defined as any committed, undrawn back-up facility that would be utilized to refinance the debt obligations of a customer in situations where such a customer is unable to rollover that debt in financial markets (e.g. pursuant to a commercial paper programme, secured financing transactions, obligations to redeem units, etc.).

The amount of a commitment to be treated as a liquidity facility is the amount of the currently outstanding debt issued by the customer (or proportionate share, if a syndicated facility) maturing within a 30 day period that is backstopped by the facility. The portion of a liquidity facility that is backing debt that does not mature within the 30-day window is excluded from the scope of the definition of a facility. Any additional capacity of the facility (i.e. the remaining commitment) would be treated as a committed credit facility and should be reported as such.

General working capital facilities for corporate entities (e.g. revolving credit facilities in place for general corporate and/or working capital purposes) will not be classified as liquidity facilities, but as credit facilities.

Notwithstanding the above, any facilities provided to hedge funds, money market funds and special purpose funding vehicles, for example SPEs (as defined in the Basel III LCR standards, paragraph 125) or conduits, or other vehicles used to finance the banks own assets, should be captured in their entirety as a liquidity facility and reported in line 238.

For that portion of financing programs that are captured in the Basel III LCR standards, paragraphs 124 and 125 (i.e. are maturing or have liquidity puts that may be exercised in the 30-day horizon); banks that are providers of associated liquidity facilities do not need to double count the maturing financing instrument and the liquidity facility for consolidated programs.

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

Balances of undrawn committed credit and liquidity facilities extended by the bank to natural persons and small business customers, as defined above. Banks should assume a 5% drawdown of the undrawn portion of these facilities.

(Refer to Paragraph 131(a) of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

Balances of undrawn committed credit facilities extended by the bank to non-financial institution corporations (excluding small business customers). The amount reported in this line should also include any ‘additional capacity’ of liquidity facilities (as defined above) provided to non-financial corporates. Banks should assume a 10% drawdown of the undrawn portion of these credit facilities.

(Refer to Paragraph 131(b) of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

Balances of undrawn committed credit facilities extended by the bank to sovereigns, central banks, PSEs, multilateral development banks and any other entity not included in other drawdown categories. The amount reported in this line should also include any ‘additional capacity’ of liquidity facilities (as defined above) provided to sovereigns, central banks, PSEs, multilateral development banks. Banks should assume a 10% drawdown of the undrawn portion of these credit facilities.

(Refer to Paragraph 131(c) of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

The amount of undrawn committed liquidity facilities should be the amount of currently outstanding debt (or proportionate share if a syndicated facility) issued by non-financial institution corporations (excluding small business customers) maturing within a 30 day period that is backstopped by the facility.

Any ‘additional capacity’ of liquidity facilities (as defined above) provided to non-financial corporates should not be reported here, rather should be reported in line 230. Banks should assume a 30% drawdown of the undrawn portion of these liquidity facilities.

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

The amount of undrawn committed liquidity facilities should be the amount of currently outstanding debt (or proportionate share if a syndicated facility) issued by sovereigns, central banks, PSEs, or multilateral development banks maturing within a 30 day period that is backstopped by the facility.

Any ‘additional capacity’ of liquidity facilities (as defined above) provided to sovereigns, central banks, PSEs, or multilateral development banks should not be reported here, rather should be reported in line 231. Banks should assume a 30% drawdown of the undrawn portion of these liquidity facilities.

(Refer to Paragraph 131(c) of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

Balances of undrawn committed credit and liquidity facilities extended to banks that are subject to prudential supervision. Banks should assume a 40% drawdown of the undrawn portion of these facilities.

(Refer to Paragraph 131(e) of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

Balances of undrawn committed credit facilities extended by the bank to other financial institutions (including securities firms, insurance companies, fiduciaries and beneficiaries). The amount reported in this line should also include any ‘additional capacity’ of liquidity facilities (as defined above) provided to other financial institutions (including securities firms, insurance companies, fiduciaries and beneficiaries). Banks should assume a 100% drawdown of the undrawn portion of these liquidity facilities.

Note

Fiduciary is defined in this context as a legal entity that is authorized to manage assets on behalf of a third party.

Fiduciaries include asset management entities such as pension funds and other collective investment vehicles.

Beneficiary is defined in this context as a legal entity that receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust, or other contract.

(Refer to Paragraph 131(f) and footnotes 43 and 44 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

The amount of undrawn committed liquidity facilities should be the amount of currently outstanding debt (or proportionate share if a syndicated facility) issued by to other financial institutions (including securities firms, insurance companies, fiduciaries and beneficiaries) maturing within a 30 day period that is backstopped by the facility.

Any ‘additional capacity’ of liquidity facilities (as defined above) provided to other financial institutions (including securities firms, insurance companies, fiduciaries and beneficiaries) should not be reported here, rather should be reported in line 236.

Note:

Banks should assume a 100% drawdown of the undrawn portion of these liquidity facilities.

Note: Definition of other financial institutions include, leasing, house finance/mortgage companies

Fiduciary is defined in this context as a legal entity that is authorized to manage assets on behalf of a third party. Fiduciaries include asset management entities such as pension funds and other collective investment vehicles.

Beneficiary is defined in this context as a legal entity that receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust, or other contract.

(Refer to Paragraph 131(f) footnotes 43 and 44 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Any contractual loan drawdowns from committed facilities (Committed facilities refer to those which are irrevocable) and estimated drawdowns from revocable facilities within the 30-day period should be fully reflected as outflows:

Balances of undrawn committed credit and liquidity facilities extended to other legal entities, including hedge funds, money market funds and special purpose funding vehicles,( The potential liquidity risks associated with the bank's own structured financing facilities should be treated according to paragraphs 124 and 125 of this document (100% of maturing amount and 100% of returnable assets are included as outflows). for example SPEs (as defined in the Basel III LCR standards, paragraph 125) or conduits, or other vehicles used to finance the banks own assets (not included in lines 228 to 237). Banks should assume a 100% drawdown of the undrawn portion of these facilities.

(Refer to Paragraph 131(g) and footnote 54 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

For Rows 242-246, the following is applicable:

If the total of all contractual obligations to extend funds to retail and non-financial corporate clients within the next 30 calendar days (not captured in the prior categories) exceeds 50% of the total contractual inflows due in the next 30 calendar days from these clients, the difference should be reported as a 100% outflow.

(Refer to Paragraph 133 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Other contingent funding obligations (treatment determined by national supervisor) These contingent funding obligations may be either contractual or non-contractual and are not lending commitments.

Non-contractual contingent funding obligations include associations with, or sponsorship of, products sold or services provided that may require the support or extension of funds in the future under stressed conditions. Non-contractual obligations may be embedded in financial products and instruments sold, sponsored, or originated by the institution that can give rise to unplanned balance sheet growth arising from support given for reputational risk considerations (Basel III LCR standards, paragraph 135). These include products and instruments for which the customer or holder has specific expectations regarding the liquidity and marketability of the product or instrument and for which failure to satisfy customer expectations in a commercially reasonable manner would likely cause material reputational damage to the institution or otherwise impair on-going viability.

SAMA will continue to work with supervised institutions in its jurisdictions to determine the liquidity risk impact of these contingent liabilities and the resulting stock of HQLA that should accordingly be maintained. SAMA has already disclosed the run-off rates they assign to each category publicly and will continue to intimate, in case of revisions made.

Note: In order to refine the cash outflow estimates in connection with trade and non trade related Letter of Credit and Guarantees, SAMA would undertake a study shortly, on account of which information would be solicited from the banking industry

Some of these contingent funding obligations are explicitly contingent upon a credit or other event that is not always related to the liquidity events simulated in the stress scenario, but may nevertheless have the potential to cause significant liquidity drains in times of stress. For this standard, SAMA and bank should consider which of these “other contingent funding obligations” may materialize under the assumed stress events. The potential liquidity exposures to these contingent funding obligations are to be treated as a nationally determined behavioral assumption where it is up to the SAMA to determine whether and to what extent these contingent outflows are to be included in the LCR. All identified contractual and non-contractual contingent liabilities and their assumptions should be reported, along with their related triggers. Supervisors and banks should, at a minimum, use historical behavior in determining appropriate outflows.

(Refer to Paragraph 135 and 136 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Trade finance instruments consist of trade-related obligations directly underpinned by the movement of goods or the provision of services. Amounts to be reported here include items such as:

• outstanding documentary trade letters of credit, documentary and clean collection, import bills, and export bills; and
• outstanding guarantees directly related to trade finance obligations, such as shipping guarantees.

Lending commitments, such as direct import or export financing for non-financial corporate firms, are excluded from this treatment and reported in lines 228 to 238.

Amount of the bank's outright short positions that are being covered by collateralized securities financing transactions. Such short positions are assumed to be maintained throughout the 30-day period and receive a 0% outflow. The corresponding collateralized securities financing transactions that are covering such short positions should be reported in lines 290 to 295 or 405 to 429.

Further guidance please refer para 147 of Basel III LCR standards reference:

In the case of a bank's short positions, if the short position is being covered by an unsecured security borrowing, the bank should assume the unsecured security borrowing of collateral from financial market participants would run-off in full, leading to a 100% outflow of either cash or HQLA to secure the borrowing, or cash to close out the short position by buying back the security. This should be recorded as a 100% other contractual outflow according to paragraph 141. If, however, the bank's short position is being covered by a collateralized securities financing transaction, the bank should assume the short position will be maintained throughout the 30-day period and receive a 0% outflow

(Refer to Paragraph 147 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Despite the roll-over assumptions in paragraphs 145 and 146, a bank should manage its collateral such that it is able to fulfil obligations to return collateral whenever the counterparty decides not to roll-over any reverse repo or securities lending transaction.( s is in line with Principle 9 of the Sound Principles.) This is especially the case for non-HQLA collateral, since such outflows are not captured in the LCR framework. SAMA would be monitoring individual banks collateral management as part of their onsite inspection.

(Refer to Paragraph 148 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Cash Inflow – Committed Facilities

Committed facilities

No credit facilities, liquidity facilities or other contingent funding facilities that the bank holds at other institutions for its own purposes are assumed to be able to be drawn. Such facilities receive a 0% inflow rate, meaning that this scenario does not consider inflows from committed credit or liquidity facilities. This is to reduce the contagion risk of liquidity shortages at one bank causing shortages at other banks and to reflect the risk that other banks may not be in a position to honor credit facilities, or may decide to incur the legal and reputational risk involved in not honoring the commitment, in order to conserve their own liquidity or reduce their exposure to that bank.

(Refer to Paragraph 149 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

6.1.3 Inflows, Liquidity Coverage Ratio (LCR) (panel B2)

Total expected contractual cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in under the scenario up to an aggregate cap of 75% of total expected cash outflows (Basel III LCR standards, paragraph 69).

Items must not be double counted – if an asset is included as part of the “stock of HQLA” (i.e. the numerator), the associated cash inflows cannot also be counted as cash inflows (i.e. part of the denominator) (Basel III LCR standards, paragraph 72).

When considering its available cash inflows, the bank should only include contractual inflows (including interest payments) from outstanding exposures that are fully performing and for which the bank has no reason to expect a default within the 30-day time horizon (Basel III LCR standards, paragraph 142). Pre-payments on loans (not due within 30 days) should not be included in the inflows.

Contingent inflows are not included in total net cash outflows (Basel III LCR standards, paragraph 142).

Banks and SAMA need to monitor the concentration of expected inflows across wholesale counterparties in the context of banks’ liquidity management in order to ensure that their liquidity position is not overly dependent on the arrival of expected inflows from one or a limited number of wholesale counterparties. SAMA in connection with the aforementioned cover the same through liquidity monitoring tools and onsite inspections.

(Refer to Paragraph 143 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

a) Secured lending including reverse repos and securities borrowing

Secured lending is defined as those loans that the bank has extended and are collateralized by legal rights to specifically designated assets owned by the borrowing institution, which the bank use or rehypothecate for the duration of the loan, and for which the bank can claim ownership to in the case of default by the borrower. In this section any transaction in which the bank has extended a collateralized loan in cash, such as reverse repo transactions, expiring within 30 days should be reported. Collateral swaps where the bank has extended a collateralized loan in the form of other assets than cash, should not be reported here, but in panel C below.

A bank should report all outstanding secured lending transactions with remaining maturities within the 30 calendar day stress horizon. The amount of funds extended through the transaction should be reported in column D (“amount extended”). The value of the underlying collateral received in the transactions should be reported in column E (“market value of received collateral”). Both values are needed to calculate the caps on Level 2 and Level 2B assets and both should be calculated at the date of reporting, not the date of the transaction. Note that if the collateral received in the form of Level 1 or Level 2 assets is not rehypothecated and is legally and contractually available for the bank's use it should be reported in the appropriate lines of the stock of HQLA section (lines 11 to 39) and not here (see paragraph 31 of the Basel III LCR standards).

Please refer to the instructions from your supervisor for the specification of items related to Level 2B assets in this subsection.

All such transactions in which the bank has obtained collateral in the form of Level 1 assets. These transactions are assumed to roll-over in full, not giving rise to any cash inflows.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 1 collateral received in these transactions.

Of the transactions backed by Level 1 assets, those where the collateral obtained is reported in panel Aa of the “LCR” worksheet as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 1 collateral received in these transactions.

All such transactions in which the bank has obtained collateral in the form of Level 2A assets. These are assumed to lead to a 15% cash inflow due to the reduction of funds extended against the collateral.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2A collateral received in these transactions.

Of the transactions backed by Level 2A assets, those where the collateral obtained is reported in panel Ab of the “LCR” worksheet as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2A collateral received in these transactions.

All such transactions in which the bank has obtained collateral in the form of Level 2B RMBS assets. These are assumed to lead to a 25% cash inflow due to the reduction of funds extended against the collateral.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2B RMBS collateral received in these transactions.

Of the transactions backed by Level 2B RMBS assets, those where the collateral obtained is reported in panel Ac of the “LCR” worksheet as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2B RMBS collateral received in these transactions.

All such transactions in which the bank has obtained collateral in the form of Level 2B non-RMBS assets. These are assumed to lead to a 50% cash inflow due to the reduction of funds extended against the collateral.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2B non-RMBS collateral received in these transactions.

Of the transactions backed by Level 2B non-RMBS assets, those where the collateral obtained is reported in panel Ac of the “LCR” worksheet as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2B non-RMBS collateral received in these transactions.

Collateralized loans extended to customers for the purpose of taking leveraged trading positions (“margin loans”) made against non-HQLA collateral. These are assumed to lead to a 50% cash inflow.

In column D: The amounts extended in these transactions.

In column E: The market value of the collateral received in these transactions.

All such transactions (other than those reported in line 287) in which the bank has obtained collateral in another form than Level 1 or Level 2 assets. These are assumed not to roll over and therefore lead to a 100% cash inflow.

In column D: The amounts extended in these transactions.

In column E: The market value of the collateral received in these transactions.

If the collateral obtained in these transactions is re-used (i.e. rehypothecated) to cover the reporting institution's outright short positions that could be extended beyond 30 days, it should be assumed that the transactions will be rolled-over and will not give rise to any cash inflows. This reflects the need to continue to cover the short position or to repurchase the relevant securities. Institutions should only report reverse repo amounts in these cells where it itself is short the collateral.

If the collateral is not re-used, the transaction should be reported in lines 274 to 288.

All such transactions in which the bank has obtained collateral in the form of Level 1 assets.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 1 collateral received in these transactions.

All such transactions in which the bank has obtained collateral in the form of Level 2A assets.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2A collateral received in these transactions.

All such transactions in which the bank has obtained collateral in the form of Level 2B RMBS assets.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2B RMBS collateral received in these transactions.

All such transactions in which the bank has obtained collateral in the form of Level 2B non-RMBS assets.

In column D: The amounts extended in these transactions.

In column E: The market value of the Level 2B non-RMBS collateral received in these transactions.

Collateralized loans extended to customers for the purpose of taking leveraged trading positions (“margin loans”) made against non-HQLA collateral.

In column D: The amounts extended in these transactions.

In column E: The market value of the collateral received in these transactions.

All such transactions (other than those reported in line 294) in which the bank has obtained collateral in another form than Level 1 or Level 2 assets.

In column D: The amounts extended in these transactions.

In column E: The market value of collateral received in these transactions.

b) Other inflows by counterparty

Contractual inflows (including interest payments and installments) due in ≤ 30 days from fully performing loans, not reported in lines 275 to 295. These include maturing loans that have already been agreed to roll over. The agreed rollover should also be reported in lines 241 to 245 as appropriate.

For all other types of transactions, either secured or unsecured, the inflow rate will be determined by counterparty. In order to reflect the need for a bank to conduct ongoing loan origination/roll-over with different types of counterparties, even during a time of stress, a set of limits on contractual inflows by counterparty type is applied.

When considering loan payments, the bank should only include inflows from fully performing loans. Inflows should only be taken at the latest possible date, based on the contractual rights available to counterparties. For revolving credit facilities, this assumes that the existing loan is rolled over and that any remaining balances are treated in the same way as a committed facility according to Basel III LCR standards, paragraph 131.

Inflows from loans that have no specific maturity (i.e. have non-defined or open maturity) should not be included; therefore, no assumptions should be applied as to when maturity of such loans would occur. An exception to this, as noted below, would be minimum payments of principal, fee or interest associated with an open maturity loan, provided that such payments are contractually due within 30 days. These minimum payment amounts should be captured as inflows at the rates prescribed in paragraphs 153 and 154. of LCR Basel III guidelines

(Refer to Paragraphs 150-152 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All payments (including interest payments and installments) from retail customers on fully performing loans not reported in lines 275 to 295 that are contractually due within the 30-day horizon. Only contractual payments due should be reported, e.g. required minimum payments of principal, fee or interest, and not total loan balances of undefined or open maturity.

Note: At the same time, however, banks are assumed to continue to extend loans to retail and small business customers, at a rate of 50% of contractual inflows. This results in a net inflow number of 50% of the contractual amount.

(Refer to Paragraph 153 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All payments (including interest payments and installments) from small business customers on fully performing loans not reported in lines 275 to 295 that are contractually due within the 30-day horizon. Only contractual payments due should be reported, e.g. required minimum payments of principal, fee or interest, and not total loan balances of undefined or open maturity.

Note: At the same time, however, banks are assumed to continue to extend loans to retail and small business customers, at a rate of 50% of contractual inflows. This results in a net inflow number of 50% of the contractual amount.

(Refer to Paragraph 153 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All payments (including interest payments and installments) from non-financial corporates on fully performing loans not reported in lines 275 to 295 that are contractually due within the 30-day horizon. Only contractual payments due should be reported, e.g. required minimum payments of principal, fee or interest, and not total loan balances of undefined or open maturity.

Note:

Banks are assumed to continue to extend loans to wholesale clients, at a rate of 0% of inflows for financial institutions and central banks, and 50% for all others, including non-financial corporates, sovereigns, multilateral development banks, and PSEs. This will result in an inflow percentage of 100% for financial institution and central bank counterparties; and 50% for non-financial wholesale counterparties

(Refer to Paragraph 154 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All payments (including interest payments and installments) from central banks on fully performing loans. Central bank reserves (including required reserves) including banks’ overnight deposits with the central bank, and term deposits with the central bank that: (i) are explicitly and contractually repayable on notice from the depositing bank; or (ii) that constitute a loan against which the bank can borrow on a term basis or on an overnight but automatically renewable basis (only where the bank has an existing deposit with the relevant central bank), should be reported in lines 7 or 8 and not here. If the term of other deposits (not included in lines 7 or 8) expires within 30 days, it should be included in this line.

Note:

Banks are assumed to continue to extend loans to wholesale clients, at a rate of 0% of inflows for financial institutions and central banks, and 50% for all others, including non-financial corporates, sovereigns, multilateral development banks, and PSEs. This will result in an inflow percentage of 100% for financial institution and central bank counterparties; and 50% for non-financial wholesale counterparties

(Refer to Paragraph 154 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All deposits held at other financial institutions for operational activities, as outlined in the Basel III LCR standards, paragraphs 93 to 104, such as for clearing, custody, and cash management activities.

Note:

Deposits held at other financial institutions for operational purposes are assumed to stay at those institutions, and no inflows can be counted for these funds

(Refer to Paragraph 156 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

For banks that belong to a cooperative network as described in paragraphs 105 and 106 of the Basel III LCR standards, this item includes all (portions of) deposits (not included in line item 306) held at the centralized institution in the cooperative banking network that are placed (a) due to statutory minimum deposit requirements which are registered at regulators, or (b) in the context of common task sharing and legal, statutory or contractual arrangements. These deposits receive a 25% runoff at the centralized institution.

Further, the depositing bank should not count any inflow for these funds – i.e. they will receive a 0% inflow rate.

(Refer to Paragraph 157 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

All payments (including interest payments and installments) from financial institutions on fully performing unsecured and secured loans, that are contractually due within the 30-day horizon, and the amount of deposits held at financial institutions that is or becomes available within 30 days, and that are not included in lines 306 or 307.

Banks may also recognize in this category inflows from the release of balances held in segregated accounts in accordance with regulatory requirements for the protection of customer trading assets, provided that these segregated balances are maintained in Level 1 or Level 2 assets. This inflow should be calculated in line with the treatment of other related outflows and inflows covered in this standard.

Banks should calculate, in accordance with their existing valuation methodologies, expected contractual derivative cash inflows and outflows. Cash flows may be calculated on a net basis (i.e. inflows can offset outflows) by counterparty, only where a valid master netting agreement exists. The sum of all net cash inflows should be reported here. The sum of all net cash outflows should be reported in line 213. Banks should exclude from such calculations those liquidity requirements that would result from increased collateral needs due to market value movements (to be reported in line 221) or falls in value of collateral posted (reported in line 216 and line 217). Options should be assumed to be exercised when they are ‘in the money’ to the option buyer. Where derivatives are collateralized by HQLA, cash inflows should be calculated net of any corresponding cash or contractual collateral outflows that would result, all other things being equal, from contractual obligations for cash or collateral to be posted by the bank, given these contractual obligations would reduce the stock of HQLA. This is in line with the principle that banks should not double count liquidity inflows and outflows.

Note that cash flows do not equal the marked-to-market value, since the marked-to-market value also includes estimates for contingent inflows and outflows and may include cash flows that occur beyond the 30-day horizon.

It is generally expected that a positive amount would be provided for both this line item and line 213 for institutions engaged in derivatives transactions.

Contractual inflows from securities, including certificates of deposit, maturing ≤ 30 days that are not already included in any other item of the LCR framework, provided that they are fully performing (i.e. no default expected). Level 1 and Level 2 securities maturing within 30 days should be included in the stock of liquid assets in panel A, provided that they meet all operational and definitional requirements outlined in the Basel III LCR standards.

Note:

Inflows from securities maturing within 30 days not included in the stock of HQLA are treated in the same category as inflows from financial institutions (i.e. 100% inflow). Banks may also recognize in this category inflows from the release of balances held in segregated accounts in accordance with regulatory requirements for the protection of customer trading assets, provided that these segregated balances are maintained in HQLA. This inflow should be calculated in line with the treatment of other related outflows and inflows covered in this standard.

(Refer to Paragraph 155 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

Cap on cash inflows

In order to prevent banks from relying solely on anticipated inflows to meet their liquidity requirement, and also to ensure a minimum level of HQLA holdings, the amount of inflows that can offset outflows is capped at 75% of total expected cash outflows as calculated in the standard. This requires that a bank must maintain a minimum amount of stock of HQLA equal to 25% of the total net cash outflows (Basel III LCR standards, paragraph 144).

The amount of total cash inflows after applying the cap is the lower of the total cash inflows before applying the cap and the level of the cap.

This requires that a bank must maintain a minimum amount of stock of HQLA equal to 25% of the total cash outflows.

(Refer to Paragraph 144 of Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools – Jan 2013)

6.1.4 Collateral swaps (panel C)

Any transaction maturing within 30 days in which non-cash assets are swapped for other noncash assets should be reported in this panel. “Level 1 assets” in this section refers to Level 1 assets other than cash. Please refer to the instructions from your supervisor for the specification of items related to Level 2B assets in this subsection.

Such transactions in which the collateral obtained is not reused (i.e. is not rehypothecated) in transactions to cover short positions.

If the collateral is re-used, the transaction should be reported in lines 405 to 429.

Of the transactions where Level 1 assets are lent and Level 1 assets are borrowed, those where:

(i) the Level 1 collateral borrowed is reported in panel Aa of the “LCR” worksheet (which should also be reported in E332), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 1 collateral lent would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (which is the value that should be reported in D332), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 1 assets are lent and Level 2A assets are borrowed, those where:

(i) the Level 2A collateral borrowed is reported in panel Ab of the “LCR” worksheet (which should also be reported in E335), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 1 collateral lent would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (which is the value that should be reported in D335), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 1 assets are lent and Level 2B RMBS assets are borrowed, those where:

(i) the Level 2B RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E338), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 1 collateral lent would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (which is the value that should be reported in D338), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 1 assets are lent and Level 2B non-RMBS assets are borrowed, those where:

(i) the Level 2B non-RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E341), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 1 collateral lent would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (which is the value that should be reported in D341), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 1 assets are lent and other assets are borrowed, those where:

(i) the Level 1 collateral lent would otherwise qualify to be reported in panel Aa of the “LCR” worksheet (value to be reported in D344), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards); and

(ii) the collateral borrowed is non-Level 1 and non-Level 2 assets (which is the value that should be reported in E344).

Of the transactions where Level 2A assets are lent and Level 1 assets are borrowed, those where:

(i) the Level 1 collateral borrowed is reported in panel Aa of the “LCR” worksheet (which should also be reported in E347), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2A collateral lent would otherwise qualify to be reported in panel Ab of the “LCR” worksheet (which is the value that should be reported in D347), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2A assets are lent and Level 2A assets are borrowed, those where:

(i) the Level 2A collateral borrowed is reported in panel Ab of the “LCR” worksheet (which should also be reported in E350), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2A collateral lent would otherwise qualify to be reported in panel Ab of the “LCR” worksheet (which is the value that should be reported in D350), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2A assets are lent and Level 2B RMBS assets are borrowed, those where:

(i) the Level 2B RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E353), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2A collateral lent would otherwise qualify to be reported in panel Ab of the “LCR” worksheet (which is the value that should be reported in D353), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2A assets are lent and Level 2B non-RMBS assets are borrowed, those where:

(i) the Level 2B non-RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E356), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2A collateral lent would otherwise qualify to be reported in panel Ab of the “LCR” worksheet (which is the value that should be reported in D356), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B RMBS assets are lent and Level 2A assets are borrowed, those where:

(i) the Level 2A collateral borrowed is reported in panel Ab of the “LCR” worksheet (which should also be reported in E365), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D365), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B RMBS assets are lent and Level 2B RMBS assets are borrowed, those where:

(i) the Level 2B RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E368), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D368), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B RMBS assets are lent and Level 2B non-RMBS assets are borrowed, those where:

(i) the Level 2B non-RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E371), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D371), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B RMBS assets are lent and other assets are borrowed, those where:

(i) the Level 2B RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D374), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards); and

(ii) the collateral borrowed is non-Level 1 and non-Level 2 assets (which is the value that should be reported in E374).

Of the transactions where Level 2B non-RMBS assets are lent and Level 1 assets are borrowed, those where:

(i) the Level 1 collateral borrowed is reported in panel Aa of the “LCR” worksheet (which should also be reported in E377), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B non-RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D377), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B non-RMBS assets are lent and Level 2A assets are borrowed, those where:

(i) the Level 2A collateral borrowed is reported in panel Ab of the “LCR” worksheet (which should also be reported in E380), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B non-RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D380), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B non-RMBS assets are lent and RMBS assets are borrowed, those where:

(i) the RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E383), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B non-RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D383), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B non-RMBS assets are lent and Level 2B non-RMBS assets are borrowed, those where:

(i) the Level 2B non-RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E386), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the Level 2B non-RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D386), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards).

Of the transactions where Level 2B non-RMBS assets are lent and other assets are borrowed, those where:

(i) the Level 2B non-RMBS collateral lent would otherwise qualify to be reported in panel Ac of the “LCR” worksheet (which is the value that should be reported in D389), if they were not already securing the particular transaction in question (i.e. would be unencumbered and would meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards); and

(ii) the collateral borrowed is non-Level 1 and non-Level 2 assets (which is the value that should be reported in E389).

Of the transactions where other assets are lent and Level 1 assets are borrowed, those where:

(i) the Level 1 collateral borrowed is reported in panel Aa of the “LCR” worksheet (which should also be reported in E392), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the collateral lent is non-Level 1 and non-Level 2 assets (which is the value that should be reported in D392).

Of the transactions where other assets are lent and Level 2A assets are borrowed, those where:

(i) the Level 2A collateral borrowed is reported in panel Ab of the “LCR” worksheet (which should also be reported in E395), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the collateral lent is non-Level 1 and non-Level 2 assets (which is the value that should be reported in D395).

Of the transactions where other assets are lent and Level 2B RMBS assets are borrowed, those where:

(i) the Level 2B RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E398), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the collateral lent is non-Level 1 and non-Level 2 assets (which is the value that should be reported in D398).

Of the transactions where other assets are lent and Level 2B non-RMBS assets are borrowed, those where:

(i) the Level 2B non-RMBS collateral borrowed is reported in panel Ac of the “LCR” worksheet (which should also be reported in E401), as the assets meet the operational requirements for HQLA as specified in paragraphs 28 to 40 of the Basel III LCR standards; and

(ii) the collateral lent is non-Level 1 and non-Level 2 assets (which is the value that should be reported in D401).

If the collateral obtained in these transactions is re-used (i.e. rehypothecated) to cover short positions that could be extended beyond 30 days, it should be assumed that the transactions will be rolled-over and will not give rise to any cash inflows. This reflects the need to continue to cover the short position or to repurchase the relevant securities.

If the collateral is not re-used, the transaction should be reported in lines 331 to 403.