(2) Level 2B HQLA consists of:
(a) residential mortgage backed securities that satisfy all of the following conditions, subject to a 25% haircut:
(i) they are not issued by, and the underlying assets have not been originated by, the Authorised Firm itself or any of its affiliated entities;
(ii) they have a Credit Quality Grade of 1 from a recognised ECAI;
(iii) they are traded in large, deep and active repo or cash markets characterised by a low level of concentration;
(iv) they have a 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 20%);
(v) the underlying asset pool is restricted to residential mortgages and does not contain structured products;
(vi) the underlying mortgages are “full recourse'' loans (i.e. in the case of foreclosure the mortgage owner remains liable for any shortfall in sales proceeds from the property) and have a maximum loan-to-value ratio (LTV) of 80% on average at issuance; and
(vii) the securitisations are subject to “risk retention” regulations which require issuers to retain an interest in the assets they securitise;
(b) corporate debt securities (including commercial paper) that satisfy all of the following conditions, subject to a 50% haircut:
(i) they are not issued by a financial institution or any of its affiliated entities;
(ii) they have a Credit Quality Grade of 2 or 3 from a recognised ECAI or, in the case the assets do not have a credit assessment by a recognised ECAI, are internally rated as having a probability of default (PD) corresponding to a Credit Quality Grade of 2 or 3;
(iii) they are traded in large, deep and active repo or cash markets characterised by a low level of concentration; and
(iv) they have a 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 20%);
(c) equity shares that satisfy all of the following conditions, subject to a 50% haircut:
(i) they are not issued by a financial institution or any of its affiliated entities;
(ii) they are exchange traded and centrally cleared;
(iii) they are a constituent of the major stock index in the home jurisdiction, or where the liquidity risk is taken, as decided by the supervisor in the jurisdiction where the index is located;
(iv) they are denominated in the domestic currency of an Authorised Firm's home jurisdiction or in the currency of the jurisdiction where an Authorised Firm's liquidity risk is taken;
(v) they are traded in large, deep and active repo or cash markets characterised by a low level of concentration; and
(vi) they have a 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 40%); and
(d) any other types of assets approved by the DFSA under PIB Rule A9.2.9 as being eligible to be Level 2B HQLA.
