Liquidity Risk Management
(Under Basel III)
Presented by Ahmad Subagyo
LIQUIDITY COVERAGE RATIO
(LCR) BASEL III OVERVIEW
BASEL III is a comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector
Internationally agreed upon measures will strengthen risk weighted capital requirements
Introduced two new standards; Leverage Ratio and LCR
Designed to ensure banks have adequate capital and stable sources of funding to withstand a crisis
BASEL III /Liquidity Coverage Ratio
Limit systematic
risk
Liqu idity Leverage
Risk-Based Capital
Net S table
Funding Ratio Long term outlook
Liquidity Coverage RateShort term outlook
The regulations will have an impact on banks and their clients
Customers can expect:
– A push for deeper relationships from their bank including a mix of products and services – The market adapting to provide new and different banking services
– Competition for LCR ‘friendly’ deposits
Source: Basel Committee on Banking Supervision, Bank of International Settlements, BOAML
BASEL III /Liquidity Coverage Ratio
The LCR is a component of the Basel III liquidity standards.
It is a measure requiring banks to hold High Quality Liquid Assets (HQLA) at least equal to projected net cash outflows over a 30 day macro stress scenario
The objective of the new capital rules and specifically the LCR is:
To improve institutions ability to withstand periods of economic stress and function as financial intermediaries during those periods
Better reflect an institutions risk profile
Net cash outflows include HQLA includes
Deposit run-of
Funding of undrawn credit / liquidity facilities
Funding of contingent liabilities
Cash & cash equivalents
Agency securities
IG corporate bonds
Source: OCC, Federal Reserve Board, FDIC
High Quality Liquid Assets
Level 1 Assets
Cash & Treasuries $60B*
Level 2A Assets
Agency Mortgage Backed Securities
(can be no more that 40% of total) $20B*
Level 2B Assets
Investment Grade Corporate Bonds
& Select Common Stock $10B*
Projected Net Cash Outflows
Retail
Consumer & Business customer
(<=$1.5MM in balances) $60B*
Wholesale
Business customer
(>$1.5MM in balances) $40B*
How is the Liquidity Coverage Ratio calculated?
Liquidity Coverage Ratio
90%*
Projected Net Cash Outflows
$100B*
High Quality Liquid Assets
$90B*
Different types of deposits have different run-off assumptions.
Numerator
The intent of the LCR is to ensure that banks remain liquid in a period of stress by requiring banks to hold HQLA against customer deposits
The bank should have enough high quality liquid assets to cover projected net cash outflows.
100% by Jan 2017 Denominator
*Numbers are for illustration purpose only
Definition of the LCR Standard
Stock of High Quality Liquid Assets Total Net Cash Outflows Over the Next 30 days
Must be greater than or equal to 100%
Must be met continuously
Timing of cash inflows and outflows may lead to mismatches and liquidity problems within the 30 day time period, so the bank and supervisors are expected to be aware of any
potential mismatches within this period
Operational versus non- operational deposits
All depository institutions will evaluate their portfolio to determine whether a deposit is deemed Operational or Non-Operational
Operational deposits provide added value to the overall organization
Defined as “fully transactional; sticky money”
Used to fund customers key operating activities
Non-operational deposits require banks to hold more HQLA
Higher runoff factors than operational balances; greater likelihood of being drawn down in a period of financial crisis
Deposits must pass a series of tests in order to be deemed Operational*
Switching cost test: ease of which to exit cash management services in 30-days
Market rate test: alignment of customer rates with the “market”
Operational services test: number of cash management products tied to a deposit
*All FI’s have created their own tests based on the regulation; there is no one size fits all
Deposit Outflow Factors
Expected cash outflow is determined by multiplying balances levels by the outflow factor. Customer type or Counterparty determines the rate applied.Source: OCC, Federal Reserve Board, FDIC
Unfunded commitments attract an LCR outflow (and cost)
Unfunded credit facilities:
Availability under general working capital facilities (e.g., revolving credit lines)
Liquidity facilities:
Commercial paper (CP) backup facilities – Assumes CP issuers lose access to short-term CP funds and have to turn to Bank liquidity facilities
Variable rate demand obligations (VRDOs)
Standby bond purchase agreements - Put feature allows the investor to put the obligation back to the issuer/financial intermediary
Direct Pay LCs – liquidity facility that can be drawn on to pay bondholders if the underlying issuer is unable to fulfill its obligation
Facilities not currently receiving a run-off %:
Standby Performance & Financial LCs
Trade LCs
Fully funded loans
What credit products are currently in scope?
LCR – Customer impacts
Media reports on the impacts of LCR to the banking industry have fully caught the attention of our customers.
Introduction of new deposit or TM fees to keep account open
Shedding 100% runoff deposits altogether
Some banks are still offering bids or rates well above (below) competitor price points
Customers are getting conflicting and confusing
messages/proposals all for the same piece of business.
Due to ambiguity of the rules; interpretation
Looking for insight and guidance from their bank – impacts new and existing customers
LCR – What can customers expect?
Push for deeper relationships from their bank including a mix of products and services
Deepening client relationships make it more difficult for customers to take their cash management business and related deposits to a competitor;
retaining/expanding these relationships is a key to maximizing operational deposits
The market adapting to provide new and different banking services
New deposit products are being developed to minimize the HQLA banks need to hold especially for 100% runoff counterparty types
Competition for LCR ‘friendly’ deposits
Each bank is looking at their balance sheet mix and the types of clients they do business with. For those looking to recalibrate with more LCR favorable deposits, there will be institutions who are very aggressive with rates and prices offered to particular customer types
Started our conversation today with the following:
LCR Has 2 Components
Value of the stock of high-quality liquid assets in stressed conditions.
Total net cash outflows, calculated according to the scenario parameters (to be discussed next).
Stock of High Quality Liquid Assets
To be considered in this category, they must be unemcumbered over a 30 days period under the prescribed stress scenario.
They must also be liquid in markets during a time of stress and, ideally, be central bank eligible.
Characteristics of High-Quality Liquid Assets
Fundamental Characteristics
Low credit and market risk.
Ease and certainty of valuation.
Low correlation with risky assets.
Listed on a developed and recognized exchange market.
Market-related Characteristics
Active and sizable market.
Presence of committed market makers.
Low market concentration.
Flight to quality.
General Test for Inclusion
The liquidity generating capacity of the asset should be assumed to remain intact even in periods of severe idiosyncratic and market stress.
Should ideally be eligible at central banks for intraday liquidity needs and overnight liquidity facilities; however, this is not a requirement.
Operational Requirements
All assets in the stock must be managed as part of that pool and are subject to operational requirements, including,
Must be unencumbered – means not pledged (either explicitly or implicitly) to secure, collateralize, or credit enhance any
transaction.
However, assets received in reverse repurchase agreements and securities financing transactions that are held at the bank, have not been rehypothecated, and are legally and
contractually available for the bank’s use can be considered as part of the stock.
Also, assets which qualify for the stock of high-quality liquid assets that have been pledged but not used for facilities at the NBM or a public sector entity may be included.
Operational Requirements, cont.
Stock should not be comingled with or used as hedges on trading positions, be designated as collateral or be designated as credit
enhancements in structure transactions or be designated to cover operational costs (such as rents and salaries), and should be managed with the clear and sole intent for use as a source of contingent funds.
Can hedge the price risks associated with ownership of the stocks and still include.
Operational Requirements, cont.
Stock should be under the control of the specific function or functions charged with managing the liquidity risk of the bank, usually the treasurer.
Should periodically monetise a proportion of the assets through repo or outright sale to test its access to the market.
LCR does not cover intraday liquidity needs that begin and end on the same day.
While the LCR is expected to be met and reported in a single currency, banks will be expected to meet their liquidity needs in each currency and maintain high-quality liquid assets consistent with their liquidity needs by currency.
Should be reported to the bank management and the NBM on a periodic basis.
Bank should take into account that in stressed conditions, the ability to swap currencies and access the relevant FX markets may be more difficult.
If an asset becomes ineligible while being considered as a high-quality liquid asset, it may be kept in the group for an additional 30 days to allow the bank to replace it or to adjust its stock.
Definition of High-Quality Liquid Asset
Should comprise assets with the characteristics outlined above.
There are two categories of high-quality liquid assets, Level 1, which can be included
without limit, and Level 2, which can only comprise up to 40% of the stock.
Level 1 Assets
Cash
Central bank reserves, to the extent that they can be drawn down in times of stress
Marketable securities representing claims on or claims guaranteed by sovereigns, central banks, non-central government public sector enterprises, BIS, IMF, EC, or multilateral development banks, provided they meet the following:
Are assigned a 0% risk weight under Basel II Standardized Approach
Are traded in large, deep and active repo or cash markets characterized by a low level of concentration
Proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed market conditions, and
Are not an obligation of a financial institution or any of its affiliated entities.
Non-0% risk weighted sovereigns, sovereign or central bank debt securities issued in domestic currencies by the sovereign or central bank in which the liquidity risk is
being taken or in the bank’s home country
Non-0% risk weighted sovereigns, domestic sovereign or central bank debt securities issued in foreign currencies, to the extent that holding of such debt matches the
currency needs of the bank’s operations in that jurisdiction.
Level 2 Assets
Can be included up to a maximum of 40% of the overall stock after haircuts have been
applied.
Minimum 15% haircut is applied to the market value of each Level 2 assets held in the
stock.
Level 2 Assets, cont.
Level 2 Assets are limited to the following:
Marketable securities representing claims on or claims guaranteed by sovereigns, central banks, non-central
government private sector enterprises or multilateral development banks that meet the following:
Assigned a 20% risk weight under Basel II standardized approach for credit risk
Traded in large, deep and active repo or cash markets characterized by a low level of concentration
Proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed market conditions (i.e. maximum decline of price or increase in haircut over a 30 day period during a relevant period of significant liquidity stress not exceeding 10%)
Not an obligation of a financial institution or any of its affiliated entities.
Level 2 Assets, cont.
Corporate bonds and covered bonds, which are bonds issued and owned by a bank and are subject by law to special public supervision designed to
protect bond holders, if they follow the following conditions:
Not issued by a financial institution or any of its affiliated entities (in the case of corporate bonds)
Not issued by the bank itself or any of its affiliated entities (in the case of covered bonds)
Assets must have a credit rating from a recognized external credit assessment
institution (ECAI) of at least AA- or do not have a credit assessment by a recognized ECAI are internally rated as having a probability of default (PD) corresponding to a credit rating of at least AA-
Traded in large, deep and active repo or cash markets characterized by a low level of concentration
Proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed market conditions, e.g. maximum decline in price or increase in haircut over a 30 day period during a relevant period of significant liquidity stress not exceeding 10%.
Testing of Additional Criteria
Basel is in the process of testing additional
qualitative and quantitative criteria for eligibility in Level 2 assets. The additional criteria are not meant to exclude assets that qualify for Level 2, but to address assets that are not liquid, as well as to provide measures in addition to credit
ratings to evaluate eligibility and not to place so much reliance on external credit ratings. These will be provided in the future.
Special Treatment for Jurisdictions with Insufficient Liquid Assets
For jurisdictions with an insufficient supply of assets, there are options provided for which we shall not go into at this time.
Total Net Cash Outflows
The denominator in the LCR.
Total Net Cash Outflows - defined as the total expected cash outflows minus total expected cash inflows in the specified stress scenario for the subsequent 30 calendar days.
Total expected cash outflows 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-of or be drawn down.
Total expected 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.
Total Net Cash Outflows = total expected cash outflows – total expected cash inflows (up to a maximum 75% of total expected cash outflows)
Cash Outflows
Retail Deposits
Term Deposits >30 days with penalty (0%)
Stable (Demand and Term) <30 days (5%)
Less Stable (Demand and Term) <30 days (10%)
Cash Outflows, cont.
Unsecured Wholesale Funding
Portion of Corporate Deposits with Operational Relationships covered by Deposit Insurance (0%)
Stable small business customers (5%)
Less Stable small business customers (10%)
Deposits needed for operational purposes of legal entities (25%)
Non financial corporates, sovereigns, central banks and PSEs (75%)
Other legal entity customers (100%)
Cash Outflows, cont.
Secured Funding
Transactions backed by L1 Assets with any counterparty (0%)
Transactions backed by L2 Assets with an counterparty (15%)
Transactions backed by assets not qualifying as highly liquid with domestic sovereigns, domestic central banks or domestic public sector entities as counterparty (25%)
All other secured funding transactions (100%)
Cash Outflows, cont.
Other items, such as undrawn commitments, liabilities related to derivative transactions, asset backed securities, covered bonds.
Presence of deposit insurance alone is not considered sufficient to consider a deposit
“stable.”
NBM should consider how FX deposits
should be considered (i.e. the runoff rates).
Cash Inflows
The bank should only include contractual inflows from outstanding exposures that are fully
performing and for which the bank has no reason to expect a default in the next 30 days.
The bank and regulator should ensure that the
bank is not highly dependent on cash inflows from one counterparty or a limited number of wholesale counterparties.
There is a maximum cap of 75% of total expected cash outflows as calculated in the standard.
Cash Inflows, cont.
A bank should assume that maturing reverse repurchase or securities borrowing agreements secured by Level 1 assets will not be rolled over and will not give rise to any cash inflows.
There are some exceptions.
No lines of credit or other contingent funding
facilities that he bank holds at other institutions for its own purposes are assumed to be able to be
drawn. Such facilities receive a weighting of 0%.
Cash Inflows, cont.
For all other types of transactions, either
secured or unsecured, the inflow rate will be determined by the counterparty.
Summary of Weights for Cash Inflows
0%
Deposits held at centralized institutions of a network of co op banks.
Operational Deposits held at other financial institutions.
Credit or liquidity facilities.
Reverse repos and securities borrowing with L1 assets as collateral.
15%
Reverse repos and securities borrowing with L2 assets as collateral.
Summary of Weights for Cash Inflows, cont.
50%
Amounts receivable from retail counterparties.
Amounts receivable from non-financial wholesale counterparties (transactions not otherwise listed).
100%
Reverse repos and securities borrowing with all other assets as collateral.
Amounts receivable from financial institutions from transactions not otherwise listed.
Net derivative receivables.
NET STABLE FUNDING RATIO
(NSFR)
Net Stable Funding Ratio
= Available Amount of Stable Funding Required Amount of Stable Funding Must be greater than 100%.
This will not be required until January 1, 2018.
In short, it ensures that long-term assets are funded at least with some stable liabilities in terms or their liquidity risk
profiles.
Encourages banks to develop more longer-term funding.
Looked at on a one-year horizon.
Definitions
Stable funding – the portion of those types and amounts of equity and liability financing expected to be reliable sources of funds over a one-year horizon under conditions of extended stress.
Available Stable Funding – defined as the total amount of a bank’s
Capital;
Preferred stock with maturity of equal to or greater than one year;
Liabilities with effective maturities of one-year or more;
That portion of non-maturity deposits and/or term deposits with maturities of less than one year that would be expected to stay with the institution for an extended period in an idiosyncratic stress event; and,
The portion of wholesale funding with maturities of less than a year that is expected to stay with the institution for an extended period in an
idiosyncratic stress event.
Includes stable and less stable retail and SME deposits.
Components of Available Stable
Funding and Associated ASF Factors
ASF Factor Components of ASF Category
100% •The total amount of capital, including
both Tier 1 and Tier 2 as defined in existing global capital standards issued by the Basel Committee.
•The total amount of any preferred
stock not included in Tier 2 that has an effective remaining maturity of one year or greater taking into account any explicit or embedded options that
would reduce the expected maturity to less than one year.
•The total amount of secured and unsecured borrowing and liabilities with effective remaining maturities of one year or more.
ASF, cont.
90% •Stable demand deposits with no
maturity and/or term deposits with residual maturities of one year or greater (retail customers and SMEs)
80% “Less stable” demand deposits and/or
term deposits with residual maturities of less than one year (retail customers and SMEs)
50% Unsecured wholesale funding, non-
maturity deposits and/or term deposits with a residual maturity less than one year (non-financial corporates,
sovereigns, central banks, MDBs, and PSEs.
0% All other liabilities
Definition of RSF for Assets and OBS Exposures
The amount of stable funding required by supervisors is to be measured using supervisory assumptions on the broad
characteristics of the liquidity risk profiles of an institution’s
assets, off-balance sheet exposures and other selected activities.
The required amount of stable funding is calculated as the sum of the value of assets held and funded by the institution, multiplied by a specific required stable funding factor (RSF) factor assigned to each particular asset type, added to the amount of OBS
activity (or potential liquidity exposure) multiplied by its associated RSF factor.
Encumbered assets are not considered to be available for
funding, unless there is a less than one year remaining on the encumbrance period.
Required Stable Funding
Components of RSF RSF Factor
Cash and unencumbered assets with a maturity of less
than one year 0%
Claims on sovereigns, central banks, MDBs with risk-
weight under Basel II 5%
Corporate or covered bonds rated AA- or better; claims on sovereigns, central banks, MDBs with 20% RW under Basel II standardized approach
20%
Gold, equities, and other corporate and covered bonds (A+ to A-) with maturities over 1 year; other loans to non- financial corporate clients, sovereigns, centrals banks, PSEs with maturity less than one year
50%
Residential Mortgages 65%
Other retail and SME loans with maturities less than one
year 85%
All other Assets 100%
Conditionally revocable and irrevocable credit and
liquidity facilities to any client. 5% of the currently undrawn portion.
Other Contingent Liabilities, including revocable obligations, L/Cs, guarantees, other trade finance instruments, and non-contractual obligations.
National supervisors to specify RSF factors based on national circumstances
Monitoring Tools
These additional metrics help a supervisor monitor liquidity risk at a bank.
Contractual maturity mismatch
Concentration of Funding
Available unencumbered assets
LCR by significant currency
Market-related monitoring tools
Contractual Maturity Mismatch
Identifies the gaps between the contractual inflows and outflows of liquidity during time bands.
At a minimum, should collect data on all categories outlined in the LCR.
Some additional data such as NPLs should be reported separately, as well as capital.
These indicate how much a bank would potentially need to raise in each of these time bands if all outflows occurred at the earliest possible date.
Banks should be expected to identify how to cover gaps.
Supervisors will determine specific template.
Instruments with no maturity should be reported separately.
Assumptions
No roll over of liabilities is expected to take place.
Other assumptions as well.
Concentration of Funding
This metric is meant to identify those sources of wholesale funding that are of such
significance that withdrawal of this funding could trigger liquidity problems.
Funding liabilities sourced from each significant community/Bank’s Balance Sheet Total
Funding liabilities sourced from each significant product or instrument/Bank’s Balance Sheet Total
List of asset and liability amounts by significant currency
For first two, should look at absolute percentage and percentage change
Concentration of Funding, cont.
Significant Counterparty – defined as a single counterparty or group of connected or affiliated
counterparties, accounting in aggregate for more than 1% of the bank’s total balance sheet.
Significant Instrument/product – defined as a single instrument/product or group of similar
instruments/products that in aggregate amount to more than 1% of the bank’s total balance sheet.
Significant currencies – defined as those aggregate
liabilities denominated in that currency amount to 5% or more of the bank’s total liabilities.
Available Unencumbered Assets
Defined as available unencumbered assets that are marketable as collateral in secondary markets and/or eligible for central bank
facilities.
Bank’s should repot that amount of these on a periodic basis.
LCR by Significant Currency
FX LCR = Stock of high quality liquid assets in each
significant currency/Total net Cash Outflows over a 30-day time period in each significant currency.
Should be net of any FX hedges.
Should mirror those high quality liquid assets definition.
Currency is considered “significant” if the aggregate liabilities denominated in that currency amount to 5% or more of the bank’s total liabilities.
No defined threshold.
Meant to allow the bank and supervisor to see potential
currency mismatch issues that could arise in times of stress.
Market Related Monitoring Tools
High frequency market data with little or no time lag can be used as earl warning indicators in monitoring
potential liquidity difficulties at banks.
Supervisors can use:
Market-wide information
Equity prices, debt markets, FX markets, commodities markets
Information on the financial sector
Such as equity and debt market information for the financial sector broadly
Bank Specific Information
Such as equity prices of a bank, money-market trading prices, spreads, price/yield of various lengths of funding
Reporting, Standards, etc.
Differences in home/host liquidity
requirements, when consolidated, liquidity parameters should be applied are those in
the home jurisdiction to all legal entities being consolidated, except for treatment of
retail/SME deposits should follow host country requirements.
Timeframes
QIS should be conducted using data from year-end
2010 and mid-year 2011 using components for both the LCR and NSFR.
Reporting to NBM throughout the observation period, expected to start on January 1, 2012 for the two
standards, including overall percentages and information on the components.
Basel Committee is prepared to make revisions if
necessary – LCR by mid-2013 and NSFR by mid-2016.
The LCR will be introduced on January 1, 2015 and the NSFR on January 1, 2018.
Definitions
Stable funding – the portion of those types and amounts of equity and liability financing expected to be reliable sources of funds over a one-year horizon under conditions of extended stress.
Available Stable Funding – defined as the total amount of a bank’s
Capital;
Preferred stock with maturity of equal to or greater than one year;
Liabilities with effective maturities of one-year or more;
That portion of non-maturity deposits and/or term deposits with maturities of less than one year that would be expected to stay with the institution for an extended period in an idiosyncratic stress event; and,
The portion of wholesale funding with maturities of less than a year that is expected to stay with the institution for an extended period in an
idiosyncratic stress event.
Includes stable and less stable retail and SME deposits.
Components of Available Stable
Funding and Associated ASF Factors
ASF Factor Components of ASF Category
100% •The total amount of capital, including
both Tier 1 and Tier 2 as defined in existing global capital standards issued by the Basel Committee.
•The total amount of any preferred
stock not included in Tier 2 that has an effective remaining maturity of one year or greater taking into account any explicit or embedded options that
would reduce the expected maturity to less than one year.
•The total amount of secured and unsecured borrowing and liabilities with effective remaining maturities of one year or more.
ASF, cont.
90% •Stable demand deposits with no
maturity and/or term deposits with residual maturities of one year or greater (retail customers and SMEs)
80% “Less stable” demand deposits and/or
term deposits with residual maturities of less than one year (retail customers and SMEs)
50% Unsecured wholesale funding, non-
maturity deposits and/or term deposits with a residual maturity less than one year (non-financial corporates,
sovereigns, central banks, MDBs, and PSEs.
0% All other liabilities
Definition of RSF for Assets and OBS Exposures
The amount of stable funding required by supervisors is to be measured using supervisory assumptions on the broad
characteristics of the liquidity risk profiles of an institution’s
assets, off-balance sheet exposures and other selected activities.
The required amount of stable funding is calculated as the sum of the value of assets held and funded by the institution, multiplied by a specific required stable funding factor (RSF) factor assigned to each particular asset type, added to the amount of OBS
activity (or potential liquidity exposure) multiplied by its associated RSF factor.
Encumbered assets are not considered to be available for
funding, unless there is a less than one year remaining on the encumbrance period.
Required Stable Funding
Components of RSF RSF Factor
Cash and unencumbered assets with a maturity of less
than one year 0%
Claims on sovereigns, central banks, MDBs with risk-
weight under Basel II 5%
Corporate or covered bonds rated AA- or better; claims on sovereigns, central banks, MDBs with 20% RW under Basel II standardized approach
20%
Gold, equities, and other corporate and covered bonds (A+ to A-) with maturities over 1 year; other loans to non- financial corporate clients, sovereigns, centrals banks, PSEs with maturity less than one year
50%
Residential Mortgages 65%
Other retail and SME loans with maturities less than one
year 85%
All other Assets 100%
Conditionally revocable and irrevocable credit and
liquidity facilities to any client. 5% of the currently undrawn portion.
Other Contingent Liabilities, including revocable obligations, L/Cs, guarantees, other trade finance instruments, and non-contractual obligations.
National supervisors to specify RSF factors based on national circumstances
Monitoring Tools
These additional metrics help a supervisor monitor liquidity risk at a bank.
Contractual maturity mismatch
Concentration of Funding
Available unencumbered assets
LCR by significant currency
Market-related monitoring tools
Contractual Maturity Mismatch
Identifies the gaps between the contractual inflows and outflows of liquidity during time bands.
At a minimum, should collect data on all categories outlined in the LCR.
Some additional data such as NPLs should be reported separately, as well as capital.
These indicate how much a bank would potentially need to raise in each of these time bands if all outflows occurred at the earliest possible date.
Banks should be expected to identify how to cover gaps.
Supervisors will determine specific template.
Instruments with no maturity should be reported separately.
Assumptions
No roll over of liabilities is expected to take place.
Other assumptions as well.
Concentration of Funding
This metric is meant to identify those sources of wholesale funding that are of such
significance that withdrawal of this funding could trigger liquidity problems.
Funding liabilities sourced from each significant community/Bank’s Balance Sheet Total
Funding liabilities sourced from each significant product or instrument/Bank’s Balance Sheet Total
List of asset and liability amounts by significant currency
For first two, should look at absolute percentage and percentage change
Concentration of Funding, cont.
Significant Counterparty – defined as a single counterparty or group of connected or affiliated
counterparties, accounting in aggregate for more than 1% of the bank’s total balance sheet.
Significant Instrument/product – defined as a single instrument/product or group of similar
instruments/products that in aggregate amount to more than 1% of the bank’s total balance sheet.
Significant currencies – defined as those aggregate
liabilities denominated in that currency amount to 5% or more of the bank’s total liabilities.
Available Unencumbered Assets
Defined as available unencumbered assets that are marketable as collateral in secondary markets and/or eligible for central bank
facilities.
Bank’s should repot that amount of these on a periodic basis.
LCR by Significant Currency
FX LCR = Stock of high quality liquid assets in each
significant currency/Total net Cash Outflows over a 30-day time period in each significant currency.
Should be net of any FX hedges.
Should mirror those high quality liquid assets definition.
Currency is considered “significant” if the aggregate liabilities denominated in that currency amount to 5% or more of the bank’s total liabilities.
No defined threshold.
Meant to allow the bank and supervisor to see potential
currency mismatch issues that could arise in times of stress.
Market Related Monitoring Tools
High frequency market data with little or no time lag can be used as earl warning indicators in monitoring
potential liquidity difficulties at banks.
Supervisors can use:
Market-wide information
Equity prices, debt markets, FX markets, commodities markets
Information on the financial sector
Such as equity and debt market information for the financial sector broadly
Bank Specific Information
Such as equity prices of a bank, money-market trading prices, spreads, price/yield of various lengths of funding
Reporting, Standards, etc.
Differences in home/host liquidity
requirements, when consolidated, liquidity parameters should be applied are those in
the home jurisdiction to all legal entities being consolidated, except for treatment of
retail/SME deposits should follow host country requirements.
Timeframes
QIS should be conducted using data from year-end
2010 and mid-year 2011 using components for both the LCR and NSFR.
Reporting to NBM throughout the observation period, expected to start on January 1, 2012 for the two
standards, including overall percentages and information on the components.
Basel Committee is prepared to make revisions if
necessary – LCR by mid-2013 and NSFR by mid-2016.
The LCR will be introduced on January 1, 2015 and the NSFR on January 1, 2018.
Introduction
Introduce the subject of the presentation.
State how presentation will benefit audience.
State presenter’s level of expertise in subject.
Tip: Click and scroll in the notes pane below to see more instructions, or to add your own speaker notes.
Training Outline
Lesson 1: Name
Provide brief description, if desired.
Lesson 2: Name
Provide brief description, if desired.
Lesson 3: Name
Provide brief description, if desired.
Lesson 1: Objectives
List the intended outcomes for this training session.
Each objective should be concise, should contain a verb, and should have a
measurable result.
Tip: Click and scroll in the notes pane below to see examples, or to add your own speaker notes.
Lesson 1: Content
Add text here.
To add a picture, chart, or other content in the right column, click the appropriate icon.
To add a slide, click New Slide on the
Insert menu, or press CTRL+M.
Lesson 1: Wrap-up
Summarize important points.
Allow time for questions.
Lesson 2: Objectives
List the intended outcomes for this training session.
Each objective should be concise, should contain a verb, and should have a
measurable result.
Lesson 2: Content
Add text here.
To add a picture, chart, or other content in the right column, click the appropriate icon.
To add a slide, click New Slide on the
Insert menu, or press CTRL+M.
Lesson 2: Wrap-up
Summarize important points.
Allow time for questions.
Lesson 3: Objectives
List the intended outcomes for this training session.
Each objective should be concise, should contain a verb, and should have a
measurable result.
Lesson 3: Content
Add text here.
To add a picture, chart, or other content in the right column, click the appropriate icon.
To add a slide, click New Slide on the
Insert menu, or press CTRL+M.
Lesson 3: Wrap-up
Summarize important points.
Allow time for questions.
Summary of Training
List important points from each lesson.
Provide resources for more information on subject.
List resources on this slide.
Provide handouts with additional resource material.
Assessment and Evaluation
Prepare a quiz or challenge to assess how much information participants learned.
Survey participants to see if they found the training beneficial.
