Liquidity Coverage Ratio (LCR)

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. 273 Reverse repo and other secured lending or securities borrowing transactions maturing ≤ 30 days All reverse repo or securities borrowing transactions maturing within 30 days, in which the bank has extended cash and obtained collateral. 145–146 274 Of which collateral is not reused (i.e. is not rehypothecated) to cover the reporting institution's outright short positions Such transactions in which the collateral obtained is not reused (i.e. is not rehypothecated) to cover the reporting institution's outright short positions. If the collateral is re-used, the transactions should be reported in lin