RBI Amends HQLA Requirement for Computing LCR of Banks
RBI amended the requirement of Level 1 High Quality Liquid Assets (HQLA) for computing the liquidity coverage ratio (LCR) of banks. The LCR computation is a part of the RBI's Basel III framework on liquidity standards, which covers LCR, liquidity risk monitoring tools, and LCR disclosure standards. The change is effective from October 01, 2018.
At present, the assets allowed as the Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing the LCR of banks include government securities in excess of the minimum Statutory Liquidity Ratio (SLR) requirement. Within the mandatory SLR requirement, Level 1 HQLA also include (i) government securities to the extent allowed by RBI under Marginal Standing Facility (MSF) [presently 2% of the bank's Net Demand and Time Liabilities (NDTL)] and (ii) under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) [presently 11% of the bank's NDTL]. It has been decided to permit banks with effect from October 01, 2018, to reckon government securities held by them up to another 2% of their NDTL, under FALLCR within the mandatory SLR requirement, as Level 1 HQLA for the purpose of computing their LCR. Hence, the carve-out from SLR, under FALLCR will now be 13%, taking the total carve out from SLR available to banks to 15% of their NDTL. For the purpose of LCR, banks shall continue to value such government securities reckoned as HQLA at an amount not greater than their current market value (irrespective of the category under which the security is held—that is, Held to Maturity/HTM, Available for Sale/AFS, or Held for Trading/HFT).
Effective Date: October 01, 2018, 2018
Keywords: Asia Pacific, India, Banking, Liquidity Risk, LCR, HQLA, Basel III, Statutory Liquidity Ratio, RBI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
