Various parameters in Liquidity Risk Management help in analyzing the liquidity status of the bank. Liquidity ratios are one such parameter prescribed by the Basel III Guidelines. In addition to Liquidity Coverage Ratio (LCR) and Net Stable funding Ratio (NSFR), the HKMA has also identified the Liquidity Maintenance Ratio (LMR) and Core funding Ratio (CFR) for Category 2 institutions.
Oracle Financial Services Liquidity Risk Regulatory Calculations for the Hong Kong Monetary Authority (LRRCHKMA) application calculates the following ratios:
Topics:
· Liquidity Coverage Ratio (LCR)
· Net Stable Funding Ratio (NSFR)
· Liquidity Maintenance Ratio (LMR)
This ratio addresses the short-term liquidity needs of a bank or financial institution during a stressful situation. It estimates whether the stock of high-quality liquid assets is sufficient to cover the net cash outflows under stress situations over a specified future period, in general, lasting 30 calendar days (or LCR horizon). LCR is calculated at the legal entity level, on a standalone and consolidated basis.
The LCR as prescribed by the HKMA is required to be reported by all institutions designated as Category 1 by the Hong Kong Monetary Authority.
This ratio addresses the medium and long-term liquidity needs of a bank, or financial institution during a stressful situation. It specifies the minimum amount of stable funding required to be maintained to promote stable long term funding.
This ratio is a simplified form of the LCR for institutions designated as Category 2 by the HKMA.
This ratio is one of the two minimum standards developed to promote funding and liquidity management in financial institutions. CFR assesses the bank’s liquidity risks over a longer time horizon.