PIB A9.2.15 PIB A9.2.15
The following table specifies, for each of the various categories or types of liabilities and off-balance sheet commitments, the rates at which they are expected to run off or be drawn down for the purpose of calculating the LCR.Cash OutflowsItemFactor
A. Retail Deposits: Demand deposit and term deposits (less than 30 days maturity):
• Stable deposits
• Less stable retail deposits
10% Term deposits with residual maturity greater than 30 days 0% B. Unsecured Wholesale Funding: Demand and term deposits (less than 30 days maturity) provided by small business customers:
• Stable deposits
• Less stable deposits
10% Small business customers – Term deposits with residual maturity greater than 30 days with no legal right to withdraw or a withdrawal with a significant penalty0% Operational deposits or operational accounts generated by clearing, custody and cash management activities:
• Portion covered by deposit insurance
5% Cooperative banks or institutions offering Islamic financial services in an institutional network (qualifying deposits with the centralised institution)25% Non-financial corporates, sovereigns, central banks, multilateral development banks and PSEs:
• If the entire amount is fully covered by a deposit protection scheme
20% Other legal entity customers100% C. Secured Funding: • Secured funding transactions with a central bank counterparty or backed by Level 1 HQLA with any counterparty 0% • Secured funding transactions backed by Level 2A HQLA, with any counterparty 15% • Secured funding transactions backed by non-Level 1 HQLA or non-Level 2A HQLA, with domestic sovereigns, multilateral development banks, or domestic PSEs as a counterparty 25% • Backed by RMBS eligible for inclusion in Level 2B HQLA 25% • Backed by other Level 2B HQLA 50% • All other secured funding transactions 100% D. Additional Requirements: Derivatives cash outflows or Shari'a compliant hedging 100% Liquidity needs (e.g. collateral calls) related to financing transactions, derivatives and other contracts 100% Market valuation changes on non-Level 1 HQLA posted collateral securing derivatives 20% Excess collateral held by a bank related to derivative transactions that could contractually be called at any time by its counterparty 100% Liquidity needs related to collateral contractually due from the reporting bank on derivatives transactions 100% Increased liquidity needs related to derivative transactions that allow collateral substitution to non-HQLA assets 100% Market valuation changes on derivatives transactions (largest absolute net 30-day collateral flows realised during the preceding 24 months) 100% ABCP, SIVs, Conduits, etc:
• Loss of funding on Asset Backed Securities, covered bonds and other structured financing instruments
100% • Loss of funding on ABCP, SIVs, SPVs, etc 100% Undrawn committed credit and liquidity facilities:
• Credit and Liquidity Facilities: Retail and small and medium-sized enterprise clients
5% • Credit Facilities: Non-financial corporates, sovereigns and central banks, PSEs, MDBs 10% • Liquidity Facilities: Non-financial corporates, sovereigns and central banks, PSEs, MDBs 30% • Credit and Liquidity Facilities: Banks subject to prudential supervision 40% • Credit Facilities: Other financial institutions (include securities firms, insurance companies, fiduciaries and beneficiaries) 40% • Liquidity Facilities: Other financial institutions (include securities firms, insurance companies, fiduciaries and beneficiaries) 100% • Credit and Liquidity Facilities: Other legal entity customers 100% • Other contractual obligations to financial institutions 100% • Other contractual obligations to retail and non-financial corporate clients 100% Other contingent funding obligations:
• Non-contractual obligations related to potential liquidity draws from joint ventures or minority investments in entities
100% • Trade finance-related obligations (including letters of credit and guarantees) 3% • Unconditionally revocable "uncommitted" credit and liquidity facilities 5% • Guarantees and letters of credit unrelated to trade finance obligations 10% Non-contractual obligations:
• Debt-buy back requests (incl. related conduits)
100% • Structured products 10% • Managed funds 10% • Other non-contractual obligations 100% Outstanding debt securities with remaining maturity > 30 days 100% Non contractual obligations where customer short positions are covered by other customers' collateral 50% Other contractual cash outflows 100%
PIB A9.2.15 Guidance1. The following
Guidancesets out the DFSA'sviews about how the Table to PIB Rule A9.2.15 should be applied to different items.
Retail Deposits:2. Retail deposits should include deposits from individuals placed with an
Authorised Firm. Depositsfrom legal entities, sole proprietorships or partnerships should be included in wholesale deposit categories. Depositsmay include demand deposits and term deposits, unless otherwise excluded.3. Under COB section 4.2, an Authorised Firmcan only accept deposits from individuals who are Professional Clients.4. Depositsfrom individuals are divided under the Table into 'stable' and 'less stable' deposits. Stable deposits should include the portion of deposits that are fully covered by an effective deposit insurance scheme or by a public guarantee that provides equivalent protection and where:a. the depositor has other established relationships with the Authorised Firmthat make deposit withdrawal highly unlikely; orb. the deposits are in transactional accounts (e.g. accounts where salaries are automatically credited).5. If an Authorised Firmis not able to readily identify which retail deposits would qualify as “stable” according to paragraph 4, it should place the full amount in the “less stable” buckets.6. Less stable deposits should consist of the portion of deposits that do not meet the conditions in paragraph 4 and also include types of deposits more likely to be withdrawn in a time of stress. These should include high-value deposits (i.e. deposits above any deposit insurance limit), deposits from customers who do not have established relationships with an Authorised Firmthat make the deposit withdrawal unlikely, deposits from sophisticated or high net worth individuals, deposits where the internet is integral to the design, marketing and use of the account (on-line accounts) and deposits with promotional interest rates (i.e. that are heavily rate-driven).7. Cash outflows related to retail term deposits with a residual maturity or withdrawal notice period of greater than 30 days should be excluded from total expected cash outflows only if the depositor has no legal right to withdraw deposits within the 30-day period of the LCR, or if early withdrawal results in a significant penalty that is materially greater than the loss of interest. If an Authorised Firmallows a depositor to withdraw such deposits despite a clause that says the depositor has no legal right to withdraw, the entire category of these funds should be treated as demand deposits.
Unsecured wholesale funding:8. Unsecured wholesale funding should consist of liabilities and general obligations raised from non-natural persons (i.e. legal entities, including sole proprietorships and partnerships) and not collateralised by legal rights to specifically designated assets owned by the
Authorised Firmaccepting the deposit in the case of bankruptcy, insolvency, liquidation or resolution. Obligations related to derivative contracts should be excluded from this category.9. The wholesale funding included in the LCR should consist of all funding that is callable within the LCR's period of 30 days or that has its earliest possible contractual maturity date within this period (such as maturing term deposits and unsecured debt securities), as well as funding with an undetermined maturity. This should include all funding with options that are exercisable at the investor's discretion within the 30-day period.10. Wholesale funding that is callable by the funds provider subject to a contractually defined and binding notice period longer than the 30-day period should not be included.11. Unsecured wholesale funding provided by small and medium-sized enterprise customers should be treated as deposits from individuals where:a. the deposits and other extensions of funds made by non-financial small and medium-sized enterprise customers are managed as retail accounts and are generally considered as having similar liquidity risk characteristics to retail accounts; andb. the total aggregated funding raised from a small and medium-sized enterprise customer is less than USD 1 million (on a consolidated basis where applicable).
Operational deposits12. Operational deposits should consist of those deposits where customers place, or leave, deposits with an
Authorised Firmto facilitate their access and ability to use payment and settlement systems and otherwise make payments. Balances can be included only if the customer has a substantive dependency on the Authorised Firmand the deposit is required for such activities.13. Qualifying activities in this context refer to clearing, custody or cash management activities where the customer is reliant on the Authorised Firmto perform these services as an independent third-party intermediary in order to fulfil its normal banking activities over the next 30 days. These services should be provided to institutional customers under a legally binding agreement and the termination of such agreements should be subject either to a notice period of at least 30 days or to significant switching costs to be borne by the customer if the operational deposits are moved before 30 days.14. Qualifying operational deposits generated by such an activity should consist of deposits which are:a. by-products of the underlying services provided by the Authorised Firm;b. not offered by the Authorised Firmin the wholesale market in the sole interest of offering interest income; andc. held in specifically designated accounts and priced without giving an economic incentive to the customer to leave excess funds on these accounts.15. Any excess balances that could be withdrawn without jeopardising these clearing, custody or cash management activities should not qualify as operational deposits.
Liquidity facilities16. A liquidity facility should consist of any committed, undrawn back-up facility that would be used to refinance the debt obligations of a customer in situations where such a customer is unable to roll over that debt in financial markets. The amount of any commitment to be treated as a liquidity facility should consist of the amount of the outstanding debt issued by the customer (or proportionate share of a syndicated facility) maturing within a 30-day period that is backstopped by the facility. Any additional capacity of the facility should be treated as a committed credit facility. General working capital facilities for corporate entities (e.g. revolving credit facilities in place for general corporate or working capital purposes) should not be classified as liquidity facilities, but as credit facilities.17. Despite paragraph 16, any facilities provided to hedge funds, money market funds and special purpose funding vehicles, or other vehicles used to finance an
Authorised Firm'sown assets, should be captured in their entirety as a liquidity facility to a financial institution.
PSIAsand other Shari'a compliant products18. For the purposes of calculating cash outflows, Unrestricted PSIAsshould be treated similarly to the relevant category of deposits specified in the Table. The appropriate run-off factor for a PSIAwill depend on the contractual withdrawal rights of the investment account holders and whether it is a retail or wholesale account.19. For commodity Murabaha transactions, a run-off factor of 100% should be applied to the balance of the Murabaha payable, if the remaining term of the contract does not exceed 30 days. If early withdrawal of the original amount is allowed at the discretion of the Authorised Firmwith no mark-up, then the applicable run-off factor will be the same as that for the relevant category of deposit or Unrestricted PSIAunder the Table.[Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]