• PRU APP10 PRU APP10 LIQUIDITY

    • PRU A10.1 PRU A10.1 Application for a global liquidity concession

      • PRU A10.1.1 PRU A10.1.1

        (1) This Rule applies to an Authorised Person carrying on business in or from the ADGM through a Branch that applies for a global liquidity concession under Rule 9.3.2.
        (2) The Authorised Person must demonstrate to the Regulator that:
        (a) its Branch complies with all applicable liquidity systems and controls requirements in section 9.2;
        (b) its head office is established in a jurisdiction where there are no legal constraints imposed by the home supervisor or any other authority on the provision of liquidity to its Branch; and
        (c) its head office is subject to equivalent or more restrictive liquidity requirements, than those imposed by the Regulator.
        (3) The Regulator may, when considering an application from the Authorised Person for a global liquidity concession, impose additional or alternative conditions to those specified in (2) or disapply a condition in (2).

        • Guidance

          1. An application for a global liquidity concession pursuant to Rule 9.3.2 should include at least the following:
          a. a clear description of the home supervisor's requirements for managing, monitoring and controlling liquidity risk;
          b. a clear description of the systems and controls used by the head office to ensure the adequacy of the Branch's liquidity;
          c. a written assurance from the Authorised Person's head office that it will:
          i. ensure that adequate liquidity is available at all times to support the Branch;
          ii. notify the Regulator, at the same time as it notifies its home supervisor, of any material issues concerning its Exposure to Liquidity Risk and issues in relation to its compliance with applicable liquidity limits, including its liquidity coverage ratio; and
          iii. in the event of a liquidity crisis, provide the Regulator with all relevant information on the whole Authorised Person's liquidity, and a list of any known constraints on the head office, legal or otherwise, providing the Branch with liquidity.
          d. a notification from the Authorised Person's home supervisor:
          i. expressing no objection to the Branch obtaining the Regulator's liquidity concession or acknowledging the Branch application to the Regulator for a global liquidity concession; and
          ii. providing information about, and confirming, the quality of Liquidity Risk systems and controls and the liquidity Exposures at the Authorised Person's head office.
          2. Under Rule A9.1.1(2)(b), the Regulator will consider liquidity transfer restrictions (e.g. ring-fencing measures, non-convertibility of local currency, foreign exchange controls) imposed under applicable laws, regulations or supervisory requirements in jurisdictions in which a banking group operates which affect the availability of liquidity by inhibiting the transfer of HQLA and fund flows within the Group.

      • PRU A10.1.2

        (1) An Authorised Person that has been granted a global liquidity concession must provide the Regulator with ongoing assurance about its Liquidity Risk by:
        (a) submitting to the Regulator at least quarterly a copy of the LCR calculation for the Authorised Person, as submitted by its head office to its home supervisor;
        (b) notifying the Regulator immediately of the results of every assessment which its home supervisor conducts which relates to the quality of liquidity systems and controls at its head office;
        (c) notifying the Regulator in writing immediately of any adverse finding or action taken by its home supervisor;
        (d) notifying the Regulator in writing immediately of any potential change in the Branch funding strategy, business model or material potential change in its balance sheet structure; and
        (e) notifying the Regulator in writing immediately of any changes relating to its compliance with the conditions referred to in Rule A9.1.1.
        (2) The Regulator may at any time, based on its assessment of the Liquidity Risk Exposures of an Authorised Person, by written notice adjust or exclude any of the requirements in (1), impose additional requirements or cancel the global liquidity concession granted to the Authorised Person.

    • PRU A10.2 PRU A10.2 The Liquidity Coverage Ratio

      • Guidance

        1. The objective of the LCR is to promote short-term resilience of an Authorised Person's Liquidity Risk profile. The LCR aims to ensure that an Authorised Person maintains an adequate level of unencumbered HQLA that can be converted into cash to meet its liquidity needs for a 30 calendar day period under a severe liquidity stress scenario.
        2. The LCR is calculated under Rule 9.3.5 using the following formula:
        LCR = Value of stock of HQLA / Total Net Cash Outflows over the next 30 calendar days
        3. The LCR has two components:
        a. Value of the stock of HQLA in stressed conditions; and
        b. Total Net Cash Outflows, calculated according to the scenario parameters outlined in this section.
        4. The stress scenario entails both institution-specific and systemic shocks including:
        a. the run-off of a proportion of retail Deposits;
        b. a partial loss of unsecured wholesale funding capacity;
        c. a partial loss of secured, short-term financing with certain Collateral and Counterparties;
        d. additional contractual outflows that would arise from a downgrade in the Authorised Person's public credit rating, where applicable, by up to and including three notches, including Collateral posting requirements;
        e. increases in market volatility that affect the quality of Collateral or potential future Exposure of Derivative positions and so require larger Collateral haircuts or additional Collateral, or lead to other liquidity needs;
        f. unscheduled draws on committed but unused credit and liquidity facilities that the Authorised Person has provided to its clients; and
        g. the potential need for the Authorised Person to buy back debt or honour non-contractual obligations to mitigate reputational risk.

      • PRU A10.2.1 PRU A10.2.1

        An Authorised Person must calculate its LCR on an ongoing basis and separately for each significant currency. An Authorised Person must report to the Regulator its aggregate LCR calculation in $USD.

        • Guidance

          A currency is considered significant if the aggregate liabilities denominated in that currency amount to 5% or more of the Authorised Person's total liabilities.

      • High Quality Liquid Assets (HQLA)

        • Guidance

          Assets that meet the conditions in Rules A9.2.2 to A9.2.9 are considered to be HQLA. Those assets are considered to be HQLA as they can be converted easily and immediately into cash at little or no loss of value. To qualify as HQLA, assets should be liquid in markets during a time of stress. In determining whether or not the market for an asset can be relied upon to raise liquidity during a time of stress, the following factors should be taken into account:

          1. fundamental characteristics, for example:
          a. low risk: high credit standing of the Issuer and a low degree of subordination, low duration, low legal risk, low inflation risk, denomination in a convertible currency with low foreign exchange risk;
          b. ease and certainty of valuation;
          c. low correlation with risky assets, not subject to wrong-way risk; and
          d. listing on a developed and recognised exchange.
          2. market-related characteristics, for example:
          a. active and sizeable market, including active outright sale or repo markets at all times. This can be demonstrated through:
          i. historical evidence of market breadth and market depth (low bid-ask spreads, high trading volumes, large and diverse number of market participants); or
          ii. existence of robust market infrastructure (presence of multiple committed market makers);
          b. low price volatility, including historical evidence of relative stability of market terms (e.g. prices and haircuts) and volumes during stressed periods; or
          c. 'flight to quality', i.e. that historically the market has shown a tendency to move into these types of high quality assets in a systemic crisis.

      • HQLA — general operational requirements

        • PRU A10.2.2

          To be eligible as HQLA, assets in the portfolio of HQLA must be appropriately diversified in terms of type of assets, type of Issuer and specific Counterparty or Issuer.

        • PRU A10.2.3

          To be eligible as HQLA, assets must meet the following requirements:

          (a) the assets must be under the control of the specific function or functions charged with managing the liquidity of the Authorised Person which must have the continuous authority and legal and operational capability to liquidate any asset in the stock; and
          (b) a representative portion of the assets in the stock of HQLA must be liquidated periodically and at least annually by the Authorised Person to test its access to the market, the effectiveness of its processes for liquidation, the availability of the assets, and to minimise the risk of negative signalling during a period of actual stress.

        • PRU A10.2.4 PRU A10.2.4

          To be eligible as HQLA, an asset must also meet the following requirements:

          (a) the asset must be unencumbered and free of legal, regulatory, contractual or other restrictions that affect the ability of the Authorised Person to liquidate, sell, transfer, or assign the asset;
          (b) the asset must not be pledged, either explicitly or implicitly, to secure, collateralise or credit-enhance any transaction, nor be designated to cover operational costs (such as rents and salaries); and
          (c) an asset received in a reverse repo or Securities Financing Transactions that is held at the Authorised Person, is eligible for inclusion in the stock of HQLA only if the asset has not been rehypothecated and is legally and contractually available for the Authorised Person's use.

          • Guidance

            1. The requirements in Rules A10.2.2 to A10.2.4 are intended to ensure that the stock of HQLA is managed in such a way that the Authorised Person can, and is able to demonstrate that it can, immediately use the assets as a source of contingent funds that is available to convert into cash to fill funding gaps between cash inflows and outflows at any time during the 30-day stress period, with no restriction on the use of the liquidity generated.
            2. Under Rule A10.2.3(a), the control of the HQLA may be evidenced either by:
            a. maintaining assets in a separate pool managed by the identified liquidity management function (typically the treasurer) with the sole intent to use it as a source of contingent funds; or
            b. demonstrating that the relevant function can liquidate the asset at any point in the 30-day stress period and that the proceeds are available to the function throughout the 30-day stress period without directly conflicting with a stated business or risk management strategy.
            3. Operational capability to liquidate assets referred to in Rule A10.2.3(b), requires procedures and appropriate systems to be in place. This includes providing the liquidity management function with access to all necessary information to liquidate any asset at any time. Liquidation of the asset should be executable operationally within the standard settlement period for the asset class in the relevant jurisdiction.

      • Caps on different types of HQLA

        • PRU A10.2.5 PRU A10.2.5

          (1) Assets eligible to be included in the stock of HQLA for the purpose of the LCR calculation are classified under the following two categories:
          (a) Level 1 HQLA, consisting of the highest quality and most liquid assets; and
          (b) Level 2 HQLA, including Level 2A HQLA and Level 2B HQLA, consisting of other High Quality Liquid Assets.
          (2) When calculating the total stock of HQLA, an Authorised Person must apply the following caps in respect of each category of assets:
          (a) Level 1 HQLA can be included in the total stock of HQLA without any limit (i.e. up to 100% of HQLA);
          (b) Total Level 2 HQLA, including both Level 2A HQLA and Level 2B HQLA, can comprise only up to 40% of the total stock of HQLA; and
          (c) Level 2B HQLA can comprise only up to 15% of the total stock of HQLA within the overall 40% limit on Level 2 HQLA in (b).
          (3) The caps on Level 2 HQLA and Level 2B HQLA must be determined after applying the haircuts required under Rules A9.2.7 and A9.2.8, and after unwinding the amounts of HQLA involved in short-term secured funding, secured lending and Collateral swap transactions maturing within 30 calendar days that involve the exchange of HQLA.
          (4) The assets to be included in each category of HQLA must be restricted to assets being held or owned by the Authorised Person on the first day of the stress period, irrespective of their residual maturity.

          • Guidance

            1. The following Guidance is intended to illustrate how Rule A10.2.5 should be applied in practice.
            2. Under Rule A10.2.5(3) the adjusted amounts of HQLA should be calculated as the amount of HQLA that would result after unwinding those short-term secured funding, secured lending and Collateral swap transactions that involve the exchange of any HQLA for any other HQLA.
            3. The calculation of the stock of HQLA under Rule A10.2.5 can be expressed as the following formula:
            Stock of HQLA = Level 1 HQLA + Level 2A HQLA + Level 2B HQLA – Adjustment for 15% cap – Adjustment for 40% cap
            Where:
            a. Adjustment for 15% cap = Max (Adjusted Level 2B HQLA – 15/85 x(Adjusted Level 1 HQLA + Level 2A HQLA), Adjusted Level 2B HQLA - 15/60 x Adjusted Level 1 HQLA, 0)
            b. Adjustment for 40% cap = Max ((Adjusted Level 2A HQLA + Adjusted Level 2B HQLA – Adjustment for 15% cap) - 2/3 x Adjusted Level 1 HQLA, 0)

      • Level 1 HQLA

        • PRU A10.2.6

          (1) Level 1 HQLA must be valued at market value.
          (2) Level 1 HQLA consists of:
          (a) banknotes and coin;
          (b) central bank reserves, to the extent that such reserves are capable of being drawn down immediately in times of stress;
          (c) marketable Securities representing claims on or claims guaranteed by sovereigns, central banks, Public Sector Entities (PSEs), the Bank for International Settlements, the International Monetary Fund, the European Central Bank and European Commission or Multilateral Development Banks (MDBs), and that satisfy all of the following conditions:
          (i) they are assigned a zero % risk-weight according to Chapter 4 and App4 of this Rulebook;
          (ii) they are traded in large, deep and active repo or cash markets characterised by a low level of concentration;
          (iii) they have a proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed market conditions; and
          (iv) they are not an obligation of a Financial Institution or any of its associated entities;
          (d) in the case of sovereigns that are not eligible for a risk-weight of zero, sovereign, or central bank debt Securities issued in domestic currencies by the sovereign or central bank in the country in which the Liquidity Risk is being taken or in the Authorised Person's home jurisdiction, where those Securities satisfy all of the conditions in paragraph (c) (ii)(iii) and (iv);
          (e) in the case of sovereigns that are not eligible for a risk-weight of zero, domestic sovereign or central bank debt Securities issued in foreign currencies, up to the amount of the Authorised Person's stressed net cash outflows in that specific foreign currency stemming from the Authorised Person's operations in the jurisdiction where the Authorised Person's Liquidity Risk is being taken, where those Securities satisfy all of the conditions in paragraph (c) (ii)(iii) and (iv); and
          (f) any other types of assets approved by the Regulator under Rule A10.2.9 as being eligible to be Level 1 HQLA.

      • Level 2A HQLA

        • PRU A10.2.7

          (1) Level 2A HQLA must be valued at market value and subject to a 15% haircut.
          (2) Level 2A HQLA consists of:
          (a) marketable Securities representing claims on or guaranteed by sovereigns, central banks, PSEs or MDBs that satisfy all of the following conditions:
          (i) they are assigned a 20% or lower risk-weight according to Chapter 4 and App4 of this Rulebook;
          (ii) they are traded in large, deep and active repo or cash markets characterised by a low level of concentration;
          (iii) 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 10%); and
          (iv) they are not an obligation of a Financial Institution or any of its associated entities;
          (b) corporate debt Securities (including commercial paper) and covered bonds that satisfy all of the following conditions:
          (i) in the case of corporate debt Securities: they must not be issued by a Financial Institution or any of its associated entities and must include only plain vanilla assets (i.e. not include complex Structured Products or subordinated debt) whose valuation is readily available based on standard methods and does not depend on private knowledge;
          (ii) in the case of covered bonds: they must not be issued by the Authorised Person itself or any of its associated entities;
          (iii) the assets must have a Credit Quality Grade of 1, or if the assets do not have a credit assessment by a recognised ECAI, they must be internally rated as having a probability of default (PD) corresponding to a Credit Quality Grade of 1;
          (iv) they must be traded in large, deep and active repo or cash markets characterised by a low level of concentration; and
          (v) they must 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 10%); and
          (c) any other types of assets approved by the Regulator under Rule A10.2.9 as being eligible to be Level 2A HQLA.

      • Level 2B HQLA

        • PRU A10.2.8

          (1) Level 2B HQLA must be valued at market value and subject to an appropriate haircut, as specified in (2), for each type of asset.
          (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 Person itself or any of its affiliated entities;
          (ii) they have a Credit Quality Grade of 1;
          (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 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 Person's home jurisdiction or in the currency of the jurisdiction where an Authorised Person'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 Regulator under Rule A10.2.9 as being eligible to be Level 2B HQLA.

      • Approval of other types of HQLA

        • PRU A10.2.9 PRU A10.2.9

          (1) The Regulator may approve other types of assets (in addition to those specified in Rules A10.2.6 to A10.2.8) as being eligible to be included in the stock of HQLA for the purposes of the calculation of the LCR.
          (2) If the Regulator approves assets under (1), it must specify whether they are to be classified as Level 1 HQLA or Level 2 HQLA and the haircut, if any, to be applied to them.

          • Guidance

            The Regulator may use its discretion under Rule A10.2.9 to approve other types of assets as HQLA including, but not limited to, Shari'a compliant Financial Products. When the Regulator approves assets it may define the conditions that the assets must satisfy to be treated as HQLA. It must specify whether the assets are to be treated as Level 1 HQLA or Level 2A or 2B HQLA.

      • Other provisions relating to LCR calculation

        • PRU A10.2.10

          For the purpose of calculating the LCR, if an eligible asset within HQLA becomes ineligible (e.g. due to a rating downgrade), an Authorised Person is allowed to keep the asset in its stock of HQLA for an additional 30 calendar days to allow time to adjust its stock as needed or replace the asset.

        • PRU A10.2.11

          For the purpose of calculating a consolidated LCR for a Financial Group, where applicable, qualifying HQLA held to meet statutory liquidity requirements at a legal entity or sub-consolidated level may be included in the stock at the consolidated level only to the extent that the related risks are also reflected in the consolidated LCR. Any surplus of HQLA held at the legal entity can be included in the consolidated stock of HQLA only if those assets would also be freely available to the consolidated Parent entity in times of stress.

        • PRU A10.2.12

          An Authorised Person must be able to meet its liquidity needs in each currency in which it has a significant Exposure. The currencies of the stock of HQLA of an Authorised Person must be similar in composition to its liquidity needs by currency.

      • Total Net Cash Outflow

        • PRU A10.2.13

          (1) An Authorised Person must calculate its Total Net Cash Outflow over the following 30 calendar days in accordance with the following formula:

          Total Net Cash Outflows over the next 30 calendar days

          =

          Total expected cash outflows

          -

          Whichever is the lesser amount of total expected cash inflows of 75% of total expected cash outflows

          (2) Total expected cash outflows are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down.
          (3) Total expected 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.
          (4) To ensure a minimum level of HQLA holdings at all times, total cash inflows are subject to an aggregate cap of 75% of total expected cash outflows.

        • PRU A10.2.14

          An Authorised Person must not double-count items. That is, for assets included as part of the eligible stock of HQLA, the associated cash inflows arising from such assets must not be counted as cash inflows for the purpose of calculating the net cash outflows over the next 30 calendar days.

      • Cash Outflows

        • PRU A10.2.15 PRU A10.2.15

          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 Outflows
          Item Factor
          A. Retail Deposits:
           
          Demand Deposit and term Deposits (less than 30 days maturity):
          •   Stable Deposits
          •   Less stable retail Deposits
          5%

          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
          5%

          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 penalty 0%
          Operational Deposits generated by clearing, custody and cash management activities:
          •   Portion covered by Deposit insurance
          25%

          5%
          Cooperative banks 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
          40%

          20%
          Other legal entity customers 100%
          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 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 10)%
          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%

          • Guidance

            The following Guidance sets out the Regulator's views about how the Table in Rule A10.2.15 should be applied to different items.

          • Retail Deposits:

            2. Retail Deposits should include Deposits from individuals placed with an Authorised Person. Deposits from legal entities, sole proprietorships or Partnerships should be included in wholesale Deposit categories. Deposits may include demand Deposits and term Deposits, unless otherwise excluded.
            3. Deposits from 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 Person that make Deposit withdrawal highly unlikely; or
            b. the Deposits are in transactional accounts (e.g. accounts where salaries are automatically credited).
            4. If an Authorised Person is 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.
            5. 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 Person that 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 ratedriven).
            6. 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 Person allows 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:

            7. 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 Person accepting the Deposit in the case of bankruptcy, insolvency, liquidation or resolution. Obligations related to Derivative contracts should be excluded from this category.
            8. 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.
            9. 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.
            10. 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; and
            b. the total aggregated funding raised from a small and medium-sized enterprise customer is less than $1 million (on a consolidated basis where applicable).

          • Operational Deposits

            11. Operational Deposits should consist of those Deposits where customers place, or leave, Deposits with an Authorised Person to 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 Person and the Deposit is required for such activities.
            12. Qualifying activities in this context refer to clearing, custody or cash management activities where the customer is reliant on the Authorised Person to 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.
            13. 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 Person;
            b. not offered by the Authorised Person in the wholesale market in the sole interest of offering interest income; and
            c. held in specifically designated accounts and priced without giving an economic incentive to the customer to leave excess funds on these accounts.
            14. Any excess balances that could be withdrawn without jeopardising these clearing, custody or cash management activities should not qualify as operational Deposits.

          • Liquidity facilities

            15. 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.
            16. Despite paragraph 15, any facilities provided to hedge funds, Money market funds and special purpose funding vehicles, or other vehicles used to finance an Authorised Person's own assets, should be captured in their entirety as a liquidity facility to a Financial Institution.

          • Unrestricted PSIAs and other Shari'a compliant products

            17. For the purposes of calculating cash outflows, Unrestricted PSIAs should be treated similarly to the relevant category of Deposits specified in the Table. The appropriate run-off factor for a PSIA will depend on the contractual withdrawal rights of the investment account holders and whether it is a retail or wholesale account.
            18. 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 Person with no markup, then the applicable run-off factor will be the same as that for the relevant category of Deposit or Unrestricted PSIA under the Table.

          • Outstanding debt securities

            19. Issuers with an affiliated dealer or market-maker must include outstanding debt securities (unsecured and secured, term as well as short-term) with remaining maturities greater than thirty days in order to cover the potential repurchase of such outstanding securities.

      • Cash Inflows

        • PRU A10.2.16

          (1) When considering its available cash inflows, an Authorised Person may include contractual inflows from outstanding Exposures only if they are fully performing and there is no reasonable basis to expect a default within the 30-day period. Contingent inflows are not included in total net cash inflows.
          (2) Where an Authorised Person is overly reliant on cash inflows from one or a limited number of wholesale Counterparties, the Regulator may set an alternative limit on the level of cash inflows that can be included in the LCR.

        • PRU A10.2.17

          (1) The Regulator may allow an Authorised Person to recognise as cash inflow, access to a Parent entity's funds via a committed funding facility if the Authorised Person is a Subsidiary of a foreign bank. In such instances, the committed funding facility from the Parent entity must meet both of the following criteria:
          (a) the facility must be an irrevocable commitment and must be appropriately documented; and
          (b) the facility must be quantified.
          (2) A committed funding facility from a Parent entity referred to in (1) can be recognised as a cash inflow only from day 16 of the LCR scenario. The cash inflow from a Parent entity can be sufficient in size to cover only net cash outflows against items with a maturity or next call date between days 16 and 30 of the LCR.

        • PRU A10.2.18 PRU A10.2.18

          The following table specifies, for each of the various categories and types of contractual receivables, the rates at which they are expected to flow in for the purpose of the calculation of the LCR:

          Cash Inflows
          Item Factor
          Maturing secured lending (incl. reverse repos and Securities borrowing), backed by the following as Collateral:  
          •   Level 1 HQLA
          0%
          •   Level 2A HQLA
          15%
          •   Level 2B HQLA — eligible RMBS
          25%
          •   Level 2B HQLA — Other assets
          50%
          •   Margin lending backed by all other Collateral
          50%
          •   All other assets
          100%
          •   Credit or liquidity facilities provided to the reporting Bank
          0%
          •   Operational Deposits held at other Financial Institutions (including Deposits held at centralised institution of network
          0%
          Other inflows by Counter party  
          •   Amounts receivable from retail Counterparties
          50%
          •   Amounts receivable from non-financial wholesale Counterparties, from transactions other than those listed in the above inflow categories
          50%
          •   Amounts receivable from Financial Institutions and central banks, from transactions other than those listed in the above inflow categories
          100%
          •   Net Derivative receivables
          100%
          •   Other contractual cash inflows
          100%

          • Guidance

            Maturing secured lending, including reverse repos and Securities borrowing

            1. An Authorised Person should assume that maturing reverse repurchase or Securities borrowing agreements secured by Level 1 HQLA will be rolled over and will not give rise to any cash inflows (zero %). Maturing reverse repurchase or Securities borrowing agreements secured by Level 2 HQLA should be modelled as cash inflows, equivalent to the relevant haircut for the specific assets. An Authorised Person is assumed not to roll-over maturing reserve repurchase or Securities borrowing agreements secured by non-HQLA assets and can assume it will receive 100% of the cash related to those agreements. Collateralised loans extended to customers for the purpose of taking leveraged trading positions, i.e. margin loans, should be modelled with a 50% cash inflow from contractual inflows made against non-HQLA Collateral.
            2. An exception to paragraph 1 is the situation where, if the Collateral obtained through reverse repo, Securities borrowing or Collateral swaps, which matures within the 30-day period, is re-used (i.e. rehypothecated) and is tied up for 30 days or longer to cover short positions. An Authorised Person should then assume that such reverse repo or Securities borrowing arrangements will be rolled over and will not give rise to any cash inflows (zero %), reflecting its need to continue to cover the short position or to repurchase the relevant Securities.
            3. An Authorised Person should manage its Collateral so that it is able to fulfil obligations to return Collateral whenever the Counterparty decides not to roll-over any reverse repo or Securities lending transaction. This is especially the case for non-HQLA Collateral, since such outflows are not captured in the LCR framework.

          • Lines of credit

            4. Lines of credit, liquidity facilities and other contingent funding facilities that an Authorised Person holds at other institutions for its own purposes should be assumed to be able to be drawn and so such facilities should receive a zero % inflow rate.

          • Inflows by Counterparty

            5. All inflows should be taken only at the latest possible date, based on the contractual rights available to Counterparties. Inflows from loans that have no specific maturity should not be included, with the exception of minimum payments of principal, fee or interest associated with an open maturity loan.
            6. Operational Deposits: a zero % inflow rate should apply to Deposits held at other Financial Institutions for operational purposes.

          • Other cash inflows

            7. Other contractual cash inflows: other contractual cash inflows should be included under this category. Cash inflows related to non-financial revenues should not be taken into account in the calculation of the net cash outflows for the purposes of the LCR. These items should receive an inflow rate of 100%.

    • PRU A10.3 PRU A10.3 The Liquidity Mismatch Approach

      • PRU A10.3.1

        (1) Outflows (liabilities) must be included in the sight-eight day time band according to their earliest contractual maturity.
        (2) Contingent liabilities may be excluded from the sight-eight day time band only if there is a likelihood that the conditions necessary to trigger them will not be fulfilled.
        (3) Inflows (assets) must be included in the sight-eight day time band according to their latest contractual maturity, except that the following assets must be included regardless of their contractual maturity:
        (a) undrawn committed standby facilities provided by other banks; and
        (b) marketable assets, at a discount.
        (4) Assets which have been pledged as Collateral must be excluded from the sight-eight day time band.

      • Including marketable assets in the Maturity Ladder

        • PRU A10.3.2

          (1) Assets which are readily marketable are included in the Maturity Ladder in the sight-eight days time band, generally at a discount to their recorded value calculated in accordance with (4).
          (2) An asset is regarded as readily marketable if:
          (a) prices are regularly quoted for the asset;
          (b) the asset is regularly traded;
          (c) the asset may readily be sold, including by repurchase agreement, either on an exchange, or in a deep and liquid market for payment in cash; and
          (d) settlement is according to a prescribed timetable rather than a negotiated timetable.
          (3) The Regulator may allow, on a case by case basis, an Authorised Person to include a longer term asset which is relatively easy to liquidate in the sighteight days time band.
          (4) The discount factor to be applied to types of marketable assets must be determined by reference to the following table and Rules A10.2.6 to A10.2.9:
          Marketable Asset Discount factor
          Level 1 HQLA 0%
          Level 2A HQLA 15%
          Level 2B HQLA – eligible asset –backed securities 25%
          Level 2B HQLA – other HQLA 50%
          Non-HQLA eligible trading assets that are Investment Grade 60%
          (5) The Regulator may vary the discount factors to reflect the conditions of a particular market or institution.

    • PRU A10.4 PRU A10.4 The Net Stable Funding Ratio

      • Guidance

        1. Neither the NSFR, nor the LCR, should be seen by an Authorised Person as providing a complete picture of its funding profile or the stability of the funding available to it. An Authorised Person should always conduct further assessments of its funding needs and sources of funding to complement the information obtained from the two measures.
         2. Terms used for the NSFR mirror those in use for the LCR, unless otherwise stated.

      • PRU A10.4.1 PRU A10.4.1

        An Authorised Person must calculate its NSFR on an ongoing basis, using the total amount of Available Stable Funding calculated in accordance with Rule A10.4.8 and the total amount of Required Stable Funding calculated in accordance with Rule A10.4.9.

        • Guidance

          1. An Authorised Person should calculate its NSFR with appropriate frequency to ensure that it is able to monitor its satisfaction of the requirement in Rule 10.4.1 at all times and, additionally, where it believes that a change has happened to its Available Stable Funding or Required Stable Funding that might result in a material change to the level of its NSFR. 
          2. For Available Stable Funding, i.e. on the funding side, the ASF factors have been calibrated to reflect the tenor of the funding with longer-term liabilities assumed to be more stable than short-term liabilities, and also the nature of the counterparty providing the funding.
          3. For Required Stable Funding, i.e. covering assets and off-balance sheet items, the RSF factors again reflect the tenor of the assets. The calibration of the factors assumes that short-dated assets should attract lower RSF factors as a proportion of them could be allowed to run to maturity instead of requiring further funding in the event of their being rolled over, which may also be influenced by the desire to maintain customer relationships. Similarly, unencumbered, high-quality assets may be more easily securitised or traded to provide additional funding and this is recognised in lower RSF factors.

      • Available Stable Funding (ASF)

        • PRU A10.4.2

          Subject to Rule A10.4.6, an Authorised Person must identify its capital instruments that are to be included in its Available Stable Funding by considering the capital elements that are meet the requirements for eligibility under: 

          (b) Rule 3.11.2; and
          (c) Rule 3.12.2, excluding all Tier 2 capital instruments with residual maturity of less than one year.

        • PRU A10.4.3

          Subject to Rule A10.4.6, an Authorised Person must include in the calculation of its Available Stable Funding the total amount of its other capital instruments that are not captured under A10.4.2 and that have a residual maturity of one year or more.

        • PRU A10.4.4

          Where the value of a Derivative Contract represents a liability for an Authorised Person, the Authorised Person must: 

          (a) calculate the negative value of the liability as the replacement cost for the contract, obtained by marking-to-market; and
          (b) deduct any collateral posted in the form of variation margin from the negative replacement cost amount.

        • PRU A10.4.5

          An Authorised Person may use the net replacement cost as the replacement cost for a set of derivative exposures between the Authorised Person and a Counterparty where the following conditions are met:

          (a) an eligible bilateral netting contract must be in place between the Authorised Person and the Counterparty that is binding on the Authorised Person and the Counterparty and that is legally enforceable in all relevant jurisdictions;
          (b) that contract is a qualified financial contract as specified in the ADGM Insolvency Regulations and meets the conditions specified in Part 7, Chapter 2 therein; and
          (c) the Authorised Person meets the disclosure requirements for the NSFR as specified in App12.

        • PRU A10.4.6

          In determining the residual maturity of an instrument captured under Rule A10.4.2 or Rule A10.4.3 or any other liability that is to be included in the Available Stable Funding, an Authorised Person must calculate the residual maturity of each instrument or liability as being that period up to the earliest point in time at which an investor has the right to exercise their right to redeem their investment or withdraw that source of funding.

        • PRU A10.4.7 PRU A10.4.7

          For long-dated liabilities, the portion of cashflows falling at or beyond the sixmonth and one-year time horizons must be treated as having an effective residual maturity of six months or more and one year or more, respectively.

          • Guidance

            1. When determining the maturity of a liability or a capital instrument, investors should be assumed to redeem a call option at the earliest possible date available to them. For funding with options exercisable at the discretion of an Authorised Person, the Regulator will take into account reputational factors that may limit the ability of the Authorised Person not to exercise the option.
            2. In particular, where the market expects certain liabilities to be redeemed before their legal final maturity date, Authorised Persons and the Regulator should assume such behaviour for the purpose of calculating the NSFR and include these liabilities in the corresponding ASF category.

        • PRU A10.4.8 PRU A10.4.8

          An Authorised Person must calculate its Available Stable Funding by:

          (a) assigning each capital instrument and liability to one of the categories in the following table;
          (b) multiplying the Carrying Value of each capital instrument and liability by the ASF factor associated with that category; and
          (c) summing those weighted values.
           
          ASF factor ASF category
          100% •  amounts from Rule A10.4.2
          •  amounts from Rule A10.4.3
          •  the total amount of secured and unsecured borrowings and liabilities (including term deposits) with effective residual maturities of one year or more, excluding all cashflows falling below the one-year horizon that are associated with such borrowings and liabilities
          95% • stable
          o demand Deposits; and
          o term Deposits and PSIAus with residual maturities of less than one year from retail and small business customers
          90% • less stable%
          o demand Deposits; and
          o term Deposits and PSIAus with residual maturities of less than one year from retail and small business customers
          50%

          • funding (secured and unsecured) with a residual maturity of less than one year provided by non-financial corporate customers

          • operational deposits generated by clearing, custody and cash management activities

          • funding with residual maturity of less than one year from sovereigns, public sector entities (PSEs), and multilateral and national development banks

          • other funding (secured and unsecured) not included in the categories above with residual maturity between six months to less than one year, including funding from central banks and financial institutions

          0%

          • all other liabilities and equity categories not included in the above categories, including other funding with residual maturity of less than six months from central banks and financial institutions

          • other liabilities without a stated maturity, and this category may include short positions and open maturity positions

          o Two exceptions may be recognised for liabilities without a stated maturity:

          ◘ deferred tax liabilities, which should be treated according to the nearest possible date on which such liabilities could be realised; and

          ◘ minority interest, which should be treated according to the term of the instrument, usually in perpetuity

          o These liabilities would then be assigned either a 100% ASF factor if the effective maturity is one year or greater, or 50%, if the effective maturity is between six months and less than one year

          • NSFR derivative liabilities as calculated according to Rule A10.4.4 net of NSFR derivative assets as calculated according to Rule A10.4.11, if NSFR derivative liabilities are greater than NSFR derivative assets

          • Net NSFR Shari’a compliant hedging liabilities (where NSFR Shari’a compliant hedging liabilities are greater than NSFR Shari’a compliant hedging assets)

          • “trade date” payables arising from purchases of financial instruments, foreign currencies and commodities that:

          o are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction; or

          o have failed to, but are still expected to, settle

           

          • Guidance

            1. Guidance on the characteristics of “stable”, “less stable” and “operational” Deposits and PSIAus is given under A10.2.15.
            2. In order to calculate the value of Shari’a compliant hedging liabilities (e.g. Islamic swaps), the replacement cost must be obtained for the Shari’a compliant hedging contracts (obtained by marking to market), such as ISDA/IIFM Tahawwut Master Agreement (TMA), where the contract has a negative value. When an eligible bilateral netting contract is in place, the replacement cost for the set of Shari’a compliant hedging exposures covered by the contract will be the net replacement cost.
            3. In calculating the NSFR, collateral posted in the form of variation margin that follows Shari’a principles in connection with Shari’a compliant hedging contracts as in the TMA contract, regardless of the asset type, must be deducted from the negative replacement cost amount of the corresponding Shari’a compliant hedging liabilities.

      • Required Stable Funding (RSF)

        • PRU A10.4.9

          Subject to Rules A10.4.15, an Authorised Person must calculate its Required Stable Funding as the sum of the Required Stable Funding for its assets and for its off-balance sheet items, calculated in accordance with Rules A10.4.16, A10.4.18 and A10.4.19.

        • PRU A10.4.10 PRU A10.4.10

          In calculating the Required Stable Funding, an Authorised Person must, subject to (b) and (c):

          (a) (i) include financial instruments, foreign currencies and commodities for which a purchase order has been executed; and
          (ii) exclude financial instruments, foreign currencies and commodities for which a sales order has been executed.
          (b) (i) The effects of such transactions must be reflected in the balance sheet of the Authorised Person when settled; and
          (ii) such transactions must not be reflected as derivatives or secured financing transactions in the balance sheet of the Authorised Person.
          (c) This treatment is to be applied whether or not such transactions have been reflected in the balance sheet under a settlement-date accounting model.

          • PRU A10.4.11

            Where the value of a Derivative Contract represents an asset for an Authorised Person, the Authorised Person must:

            (a) calculate the positive value of the asset as the replacement cost for the contract, obtained by marking-to-market; and
            (b) deduct any collateral received in the form of variation margin from the positive replacement cost amount.

          • PRU A10.4.12

            An Authorised Person may use the net replacement cost as the replacement cost for a set of derivative exposures between the Authorised Person and a Counterparty where the following conditions are met:

            (a) an eligible bilateral netting contract must be in place between the Authorised Person and the Counterparty that is binding on the Authorised Person and the Counterparty and that is legally enforceable in all relevant jurisdictions;
            (b) that contract is a qualified financial contract as specified in the ADGM Insolvency Regulations and meets the conditions specified in Part 7, Chapter 2 therein; and
            (c) the Authorised Person meets the disclosure requirements for the NSFR as specified in App12.

          • PRU A10.4.13

            Where an Authorised Person has entered into secured funding arrangements, the Authorised Person must:

            (a) include in its calculation of the RSF;
            (i) securities it has lent in SFTs where it retains beneficial ownership; and
            (ii) encumbered securities in repos or other securities financing transactions where it has retained beneficial ownership and those assets remain on its balance sheet; and
            (b) exclude from its calculation of the RSF;
            (i) securities which it has borrowed in SFTs (such as reverse repos and collateral swaps) and to which it does not have beneficial ownership; and
            (ii) any securities it has received through collateral swaps if those securities do not appear on its balance sheet.

          • PRU A10.4.14

            An Authorised Person may measure SFTs with a single Counterparty net when calculating the NSFR where the following conditions are met:

            (a) an eligible bilateral netting contract must be in place between the Authorised Person and the Counterparty that is binding on the Authorised Person and the Counterparty and that is legally enforceable in all relevant jurisdictions;
            (b) that contract is a qualified financial contract as specified in the ADGM Insolvency Regulations and meets the conditions specified in Part 7, Chapter 2 therein; and
            (c) the Authorised Person meets the disclosure requirements for the NSFR as specified in App12.

          • PRU A10.4.15 PRU A10.4.15

            In determining the residual maturity of both assets and off-balance sheet items that are to be included in the Required Stable Funding, an Authorised Person must calculate the residual maturity of each individual asset or off-balance sheet item as being that period up to the latest point in time to which investors have the right to extend the maturity of an asset or an off-balance sheet item.

            • Guidance

              1. When determining the residual maturity of assets and off-balance sheet items, investors should be assumed to exercise any option to extend maturity. For assets with options exercisable at the discretion of the Authorised Person, the Regulator will take into account reputational factors that may limit the ability of the Authorised Person not to exercise the option.
              2. In particular, where the market expects certain assets to be extended in their maturity, Authorised Persons and the Regulator should assume such behaviour for the purpose of the NSFR and include these assets in the corresponding RSF category. For amortising loans, the portion that comes due within the one-year horizon may be considered as a having a residual maturity of less than one year and included in the appropriate RSF category.

          • PRU A10.4.16 PRU A10.4.16

            Subject to A10.4.17, an Authorised Person must calculate the Required Stable Funding that it needs for its assets by:

            (a) assigning each asset to one of the RSF asset categories in the following table;
            (b) multiplying the Carrying Value of each asset by the RSF factor associated with that asset category; and
            (c) summing those weighted values.
             
            RSF factor RSF asset category
            0% •  coins and banknotes immediately available to meet obligations
            •  all central bank reserves (including required reserves and excess reserves)
            •  all claims on central banks with residual maturities of less than six months
            •  “trade date” receivables arising from sales of financial instruments, foreign currencies and commodities that:
            o  are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction; or
            o  have failed to, but are still expected to, settle
            5% •  unencumbered Level 1 HQLA as defined in Rule A10.2.6(2), excluding those assets receiving an RSF factor of 0% as above
            10% •  unencumbered loans to financial institutions with residual maturities of less than six months, where the loan is secured against Level 1 HQLA as defined in Rule A10.2.7(2), and where the bank has the ability to freely rehypothecate the received collateral for the life of the loan
            15% •  unencumbered Level 2A assets as defined in Rule A10.2.8(2)
            •  all other unencumbered loans to financial institutions with residual maturities of less than six months not receiving an RSF factor of 10%
            50% • unencumbered Level 2B assets as defined and subject to the conditions set forth in Rule A10.2.8
            • any HQLA as defined in Rule A10.2.6, Rule A10.2.7 or Rule A10.2.8 that are encumbered for a period of between six months and less than one year
            • all loans to financial institutions and central banks with residual maturity of between six months and less than one year
            • operational deposits held at other financial institutions for operational purposes that are subject to the 50% ASF factor
            • all other non-HQLA not included in the above categories that have a residual maturity of less than one year, including loans to non-financial corporate clients, loans to retail customers (i.e. natural persons) and small business customers, and loans to sovereigns and PSEs
            65% • unencumbered residential mortgages with a residual maturity of one year or more that would qualify for a 50% or lower risk weight under Rule 4.12.17
            • other unencumbered loans not included in the above categories, excluding loans to financial institutions, with a residual maturity of one year or more that would qualify for a 50% or lower risk weight under Section 4.12
            85% • cash, securities or other assets posted as initial margin for Derivative Contracts or Shari’a compliant hedging contracts and cash or other assets provided to contribute to the default fund of a central counterparty (CCP). Where securities or other assets posted as initial margin for Derivative Contracts would otherwise receive a higher RSF factor, they must retain that higher factor
            • other unencumbered performing loans19 that do not qualify for a 50% or lower risk weight under Section 4.12 and have residual maturities of one year or more, excluding loans to financial institutions
            • unencumbered securities with a remaining maturity of one year or more and exchange-traded equities, that are not in default and do not qualify as HQLA according to the LCR
            • physical traded commodities, including gold
             
             

            • Guidance

              Guidance on the characteristics of “operational” Deposits is given under Rule A10.2.15.

          • PRU A10.4.17

            For encumbered assets not captured in the table in Rule A10.4.16, an Authorised Person must assign an RSF factor for Required Stable Funding in accordance with the following.

            (a) Assets encumbered for a period of between six months and less than one year that would, if unencumbered, receive an RSF factor lower than or equal to 50% must receive an RSF factor of 50%.
            (b) Assets encumbered for between six months and less than one year that would, if unencumbered, receive an RSF factor higher than 50% retain that higher RSF factor.
            (c) Where assets have less than six months remaining in the encumbrance period, those assets may receive the same RSF factor as an equivalent asset that is unencumbered.
            (d) For the purposes of calculating the NSFR, assets that are encumbered for exceptional central bank liquidity operations must receive the RSF factor that they would if they were unencumbered.

          • PRU A10.4.18

            An Authorised Person must calculate the Required Stable Funding that it needs for the assets to which Rule A10.4.17 applies by:

            (a) multiplying the Carrying Value of each of those assets by the RSF factor identified in Rule A10.4.17; and
            (b) summing those weighted values.

          • PRU A10.4.19

            An Authorised Person must calculate the Required Stable Funding that it needs for its off-balance sheet items, including potential liquidity exposures, by:

            (a) assigning each off-balance sheet items to one of the RSF off-balance categories in the following table;
            (b) multiplying the value of each of those items by the RSF factor associated with that off-balance sheet category; and
            (c) summing those weighted values.
             
            RSF factor RSF off-balance sheet category
            5% of the currently undrawn portion • Irrevocable and conditionally revocable credit and liquidity facilities to any client
            National discretion 5% • Other contingent funding obligations, including products and instruments such as:
            3% o unconditionally revocable credit and liquidity facilities
            10% o trade finance-related obligations (including guarantees and letters of credit)
            100%

            o non-contractual obligations such as:

            • potential requests for debt repurchases of the bank’s own debt or that of related conduits, securities investment vehicles and other such financing facilities

            • structured products where customers anticipate ready marketability, such as adjustable rate notes and variable rate demand notes (VRDNs)

            • managed funds that are marketed with the objective of maintaining a stable value