• PRU 9.3 PRU 9.3 Liquidity requirements

    • PRU 9.3.1

      This Section applies to an Authorised Person in Category 1 or 5.

    • Global liquidity concession

      • PRU 9.3.2 PRU 9.3.2

        (1) An Authorised Person which carries on business in the ADGM through a Branch may apply to the Regulator for a global liquidity concession.
        (2) An application for a global liquidity concession must be made in accordance with the requirements in section A10.1 of App10.
        (3) If the Regulator grants a global liquidity concession to an Authorised Person, that Authorised Person need not comply with the quantitative liquidity requirements of this Section.
        (4) The Regulator may specify the period for which a global liquidity concession is valid.

        • Guidance

          Section A10.1 in App10 provides guidance in respect of the type of information upon which the Regulator will base its assessment of an application for a global liquidity concession.

      • The Maturity Mismatch approach

    • HQLA requirement

      • PRU 9.3.3

        An Authorised Person must at all times maintain an adequate level of HQLA to meet its liquidity needs for a minimum 30 calendar day period under a severe stress scenario.

        Rules A10.2.2 to A10.2.9 in App10 set out the conditions for assets to be treated as HQLA.

    • Liquidity Coverage Ratio

      • PRU 9.3.4 PRU 9.3.4

        An Authorised Person must, except as provided in Rule 9.3.7, maintain an LCR of at least 100%.

        • Guidance

          Rule 9.3.4 sets a minimum level and is not intended to limit the generality of the requirement in Rule 9.3.3.

      • PRU 9.3.5 PRU 9.3.5

        An Authorised Person must calculate its LCR using the following formula and in accordance with the Rules in section A10.2 of App10.

        LCR = Value of stock of HQLA / Total Net Cash Outflows over the next 30 calendar days.

        • Guidance

          1. Section A10.2 of App10 sets out how the value of stock of HQLA and Total Net Cash Outflows are to be calculated.
          2. An Authorised Person active in multiple currencies should:
          a. maintain HQLA consistent with the distribution of its liquidity needs by currency;
          b. assess its aggregate foreign currency liquidity needs and determine an acceptable level of currency mismatches; and
          c. undertake a separate analysis of its strategy for each currency in which it has material activities, considering potential constraints in times of stress.

      • PRU 9.3.6

        (1) An Authorised Person must, except as provided under Rule 9.3.8, maintain a buffer of HQLA over the minimum level of LCR required under its LCR Requirement, appropriate to the nature, scale and complexity of its operations and in line with its Liquidity Risk tolerance.
        (2) The Regulator may require an Authorised Person to maintain an additional buffer of liquid assets in cases where the Regulator assesses that the Authorised Person has failed to carry out stress tests effectively.

    • Liquid assets buffer

      • PRU 9.3.7 PRU 9.3.7

        (1) An Authorised Person must, except as provided under Rule 9.3.8, maintain a buffer of HQLA over the minimum level of LCR required under its LCR Requirement, appropriate to the nature, scale and complexity of its operations and in line with its Liquidity Risk tolerance.
        (2) The Regulator may require an Authorised Person to maintain an additional buffer of liquid assets in cases where the Regulator assesses that the Authorised Person has failed to carry out stress tests effectively.

        • Guidance

          1. An Authorised Person should conduct its own stress tests to assess the level of liquidity it should hold beyond the minimum required under this section, and construct its own scenarios that could cause difficulties for its specific business activities. Such internal stress tests should incorporate longer periods than the one required under this section. Authorised Persons are expected to share the results of these additional stress tests with the Regulator.

    • Liquidation of assets during periods of stress

      • PRU 9.3.8

        An Authorised Person must notify the Regulator in writing immediately if it does not meet, or becomes aware of circumstances that may result in it not meeting, at any time, its LCR Requirement (including during a period of stress referred to in Rule 9.3.8).

    • Notification if LCR Requirement not met

      • PRU 9.3.9 PRU 9.3.9

        An Authorised Person must notify the Regulator in writing immediately if it does not meet, or becomes aware of circumstances that may result in it not meeting, at any time, its LCR Requirement (including during a period of stress referred to in Rule 9.3.8).

        • Guidance

          1. An Authorised Person should in its notification clearly explain:
          a. the reasons for not meeting the LCR Requirement;
          b. measures that have been taken and will be taken to ensure it reverts to meeting its LCR Requirement as soon as possible; and
          c. its expectations regarding the potential duration of the situation.
          2. An Authorised Person that makes a notification should discuss with the Regulator what, if any, further steps it should take to deal with the situation.

    • The Liquidity Mismatch Approach

      • Guidance

        The Liquidity Mismatch Approach measures an Authorised Person's short-term liquidity by assessing the maturity mismatch between its inflows (assets) and outflows (liabilities) over an eight-day time horizon.

      • PRU 9.3.10

        (1) An Authorised Person in Category 1 or 5 must use the Liquidity Mismatch Approach, as set out in this Section, to measure its short-term liquidity.
        (2) When using the Liquidity Mismatch Approach, an Authorised Person must determine the net cumulative maturity mismatch position for the time band from sight to eight days by:
        (a) determining, in accordance with the Rules in Sections A10.2 and A10.3, the inflows (assets) and outflows (liabilities) in that time band; and
        (b) subtracting outflows (liabilities) from inflows (assets) in that time band.

    • Measuring liquidity for Category 1 and Category 5

      • PRU 9.3.11

        (1) An Authorised Person in Category 1 or 5 must determine a net cumulative maturity mismatch position for the sight-eight day time band in respect of each of the following means of funding used by the Authorised Person:
        (a) PSIAus; and
        (b) Deposits.
        (2) An Authorised Person in Category 1 or 5 must calculate its short-term liquidity by using the net cumulative maturity mismatch position separately for each means of funding used by the Authorised Person as a percentage of the means of funding in the sight-eight day time band as follows:
        (a) PSIAus net cumulative Maturity Mismatch % =

        Net cumulative maturity mismatch × 100/Total PSIAus
        (b) Total Deposit liabilities net cumulative Maturity Mismatch % =

        Net cumulative Maturity Mismatch × 100/Total Deposits
        (3) If an Authorised Person exceeds a net cumulative maturity mismatch limit of -15% in respect of any of the means of funding it must immediately inform the Regulator in writing and clearly explain what steps it will take to bring its liquidity position back within the limit.

    • Net Stable Funding Ratio - NSFR

      • PRU 9.3.12 PRU 9.3.12

        An Authorised Person must maintain an NSFR of at least 100% at all times, calculated using the following formula.

        NSFR = Available Stable Funding / Required Stable Funding

        • Guidance

          1. The NSFR complements the LCR and is designed to enable Authorised Persons to maintain a stable funding profile over a longer time horizon than that associated with the LCR. It is based on assigning factors to the liabilities and capital instruments of an Authorised Person that reflect their stability, and to the assets and off-balance sheet items of that Authorised Person that reflect their liquidity.
          2. Section A10.4 of App10 sets out how the amounts of Available Stable Funding and Required Stable Funding are to be calculated.

      • PRU 9.3.13

        An Authorised Person must notify the Regulator immediately and confirm in writing if its NSFR falls below 100% or if it believes that is likely to happen.