Sunday, February 14, 2016

Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards



Presently, the assets allowed as the Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing the LCR include Government securities in excess of the minimum SLR requirement, and within the mandatory SLR requirement:
·      Government securities allowed by RBI, under MSF is presently 2 % of the bank’s NDTL and under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) it is 5% of the bank’s NDTL.

Henceforth, in addition to the above-mentioned assets, banks will be permitted to reckon another 3 per cent of their NDTL under FALLCR as level 1 HQLA for the purpose of LCR.

Hence the total carve-out from SLR available to banks would be 10 per cent of their NDTL.

Banks should value such securities at their current market value.

Based on RBI Circular dt 11/02/16. Please visit www.rbi.org.in for any further clarification if required…..       Poppy