Core Funding Ratio (CFR) 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. Both standards complement each other, are aimed at providing a holistic picture of a bank’s funding risk profile, and aid in better liquidity risk management practices. All 2 A institutions are required to calculate CFR.
Topics:
· Overview
· Pre-configured HKMA Regulatory CFR Scenarios
CFR is defined as the amount of core funding relative to the required core funding. Available core funding refers to the portion of capital and liabilities expected to be reliable over the horizon of 1 year. Required core funding refers to the portion of assets and off-balance sheet exposures over the same horizon. The CFR does not contain encumbered assets and the ratio is expected to be at least 100%.
The Available Core Funding (ACF) factor and Required Core Funding (RCF) factor is applied through business assumptions and reflects through the execution of a Business as Usual (BAU) run in the OFS LRRCHKMA application. The ACF and RCF factors are applied as weights at the account level and the Total ACF and Total RCF are obtained by taking a sum of all the weighted amounts. The ratio is then computed by the application as the (Total ACF amount)/(Total RCF amount). A set of predefined business assumptions for ACF and RCF as defined in the CFR guidelines are prepackaged in the application. For the complete list of preseeded ACF and RCF assumptions, see the Regulation Addressed through Business Assumptions section.
Topics:
· Computing Available Amount of Core Funding
· Computing Required Amount of Core Funding
· Computing Core Funding Ratio
One of the various dimensions used to allocate ACF and RCF factors is the maturity bucket of the instrument. For CFR computation, maturity bands are used to allocate the factors. The HKMA CFR band is predefined as per regulatory guidelines and has the following values:
· Less than 6 months
· Greater than or equal to 6 months but less than 1 year
· Greater than or equal to one year
· Open maturity
All accounts will be categorized on one of these bands depending on the maturity date. Note that to categorize any product into open maturity, the LRM - Classification of Products as Open Maturity Rule must be edited and the product must be included in the rule.
The available core funding factor is a pre-determined weight ranging from 0% to 100% which is applied through business assumptions for the accounts falling under the dimensional combinations defined. The weights are guided by the CFR standard. The available core funding is then taken as a total of all the weighted amounts where an ACF factor is applied.
Foreign bank branches can account for the undrawn contractual committed facilities from its head office or other branches that are the same entity and are regional hubs as ACF up to 40% of the minimum ACF required to meet the minimum requirement of CFR.
The formula for calculating the Available Amount of Stable Funding is as follows:
The following is an example of applying the ACF factor:
Consider an assumption defined with the following dimensional combination and ACF factors, based on the measure being Total Stable Balance.
Product |
Retail/Wholesale Indicator |
Residual Maturity Band |
ACF Factor |
|---|---|---|---|
Deposits |
R |
<= 6 months |
95% |
Deposits |
R |
6 months - 1 year |
95% |
Deposits |
R |
>= 1 year |
95% |
If five accounts are falling under this combination, then after the assumption is applied the resulting amounts with the application of ACF factors is as follows.
Account |
Stable Balance |
ACF Weighted Amount |
|---|---|---|
A1 |
3400 |
3230 |
A2 |
3873 |
3679.35 |
A3 |
9000 |
8550 |
A4 |
1000 |
950 |
A5 |
100 |
95 |
NOTE:
The LRRCHKMA application does not compute ACF items such as Tier 1 and Tier 2 capital, deferred tax liabilities, and minority interest. The items are taken as a download from the OFS Basel application. By updating the latest Basel Run Skey as a setup parameter, LRRCHKMA picks up the respective standard accounting head balances and applies the respective ACF factors.
If OFS Basel is not installed, then the following items must be provided as a download in the FCT_STANDARD_ACCT_HEAD table:
· Gross Tier 2 Capital
· Deferred Tax Liability related to Other Intangible Asset
· Deferred Tax Liability related to Goodwill
· Deferred Tax Liability related to MSR
· Deferred Tax Liability related to Deferred Tax Asset
· Deferred Tax Liability related to Defined Pension Fund Asset
· Net CET1 Capital post-Minority Interest Adjustment
· Net AT1 Capital post-Minority Interest Adjustment
· Total Minority Interest required for CFR
The required core funding factor is a pre-determined weight ranging from 0% to 100% which is applied through business assumptions for the accounts falling under the defined dimensional combinations. The weights are guided by the CFR standard. The required core funding is then considered as a sum of all the weighted amounts where an RCF factor is applied.
The required core funding factor is a weight function and is applied similarly to that of the ACF. The formula which is used for calculating the Required Amount of Core Funding is as follows:
Topics:
· Computation of Off-Balance Sheet Items
Off-balance sheet items are considered under the application of the RCF factor and are given the appropriate factor as guided. Some combinations, such as the line of credit, have a predefined RCF factor as guided and are available as preseeded assumptions. Other off-balance sheet products, such as Variable Rate Demand Notes (VRDN) and Adjustable Rate Notes (ARN), do not have predefined factors and are left to the discretion of the jurisdictions. For such products, define assumptions and apply desired RCF factors as applicable.
Derivatives are handled through the application of both ACF and RCF factors as applicable. They can behave as either an asset or a liability, depending on the marked-to-market value. The application of factors on derivatives is done on the market value after subtracting the variation margin posted/received against the account, using the following computation:
1. CFR derivative liabilities = Derivative liabilities - (Total collateral posted as variation margin against the derivative liabilities)
2. CFR derivative assets = Derivative assets - (Cash collateral received as variation margin against the derivative assets)
3. The factors are then applied as follows:
§ ACF factor application
ACF amount for derivatives = 0% * Max ((CFR derivative liabilities - CFR derivative assets), 0)
§ RCF factor application
RCF amount for derivatives = 100% * Max ((CFR derivative assets - CFR derivative liabilities), 0)
Derivative liabilities refer to those derivative accounts where the market value is negative. Derivative assets refer to those derivative accounts where the market value is positive. Apart from the variation margin, the initial margin against derivative contracts is also treated with the appropriate factor.
The Core Funding Ratio is calculated as follows:
OFS LRRCHKMA supports ready-to-use HKMA CFR assumptions according to HKMA guidelines on the Core funding ratio.
This section explains the business assumptions which support CFR as per HKMA master circular HKMA Notification No. 1-2561: Regulations on the Core Funding Ratio (CFR), April 2018.
The following table lists the Document Identifiers provided in the column Regulatory Reference of Regulations Addressed through Business Assumptions.
Regulation Reference Number |
Document Number |
Document Name |
Issued Date |
|---|---|---|---|
B1/15C S4/16C |
MA(BS)26 |
Return of Stable Funding Position of an Authorized Institution |
11 January 2018 |
NOTE:
This section gives only the contextual information of the business assumptions. For more information, see the OFS LRS application (UI).
Topics:
· Regulation Addressed through Business Assumptions
· Regulation Addressed through Business Rules
The application supports multiple assumptions with preconfigured rules and scenarios based on regulator-specified CFR scenario parameters. The list of pre-configured business assumptions and the corresponding reference to the regulatory requirement that it addresses is provided in the following tables:
Topics:
This section enlists all the preseeded assumptions acting on liabilities and capital items which receive an ACF factor.
Sl. No. |
Business Assumption Name |
Business Assumption Description |
Regulatory Requirement Addressed |
Regulatory Reference |
|---|---|---|---|---|
1 |
HKMA ACF - Capital Items, DTL and Minority Interest |
HKMA ACF - Tier 1 and tier 2 capital, Deferred tax liabilities and minority interest |
This assumption defines the long-term funding sources with an effective maturity of one year or more, primarily tier 1 and tier 2 capital instruments along with deferred tax liability and minority interest, which are assigned a 100% ACF factor for the NSFR computation. |
Paragraphs 73, 79 |
2 |
HKMA ACF - Other Capital Instruments |
HKMA ACF - Other Capital Instruments that are not covered above |
This assumption defines the long-term funding sources with an effective maturity of one year or more, all the other capital instruments except tier 1 and tier 2 capital instruments along with deferred tax liability and minority interest, which are assigned a 100% ACF factor for the NSFR computation. |
Paragraphs 73, 79 |
3 |
HKMA ACF - Non-Bank Deposits |
HKMA ACF - Deposits from non-bank customers. |
The ACF factors applicable to deposits, from all except banks, central banks, regional development banks, national development banks (NDB), multilateral development banks (MDB, with a remaining maturity of 1 year or less, are predefined as part of this assumption. This assumption applies a 90% ACF factor on the deposits from all except banks, central banks, regional development banks with a remaining maturity between 6 months to 1 year. It also applies an 80% ACF factor on the deposits from all except banks, central banks, regional development banks with open maturity, a remaining maturity of less than 6 months, and a remaining maturity of 1 year or more. |
Paragraph 75 |
4 |
HKMA ACF - Non-Bank Deposits - Cash Flow Basis |
HKMA ACF - Deposits from non-bank customers with a remaining maturity of more than 1 yr. and cash flow maturity of less than 1 year. |
The ACF factors applicable to deposits, from all except banks, central banks, regional development banks, national development banks (NDB), multilateral development banks (MDB), with a remaining maturity of more than 1 year with cash flow maturities within 1 year, are predefined as part of this assumption. This assumption applies an 80% ACF factor on the stable portion of cash flows with cash flow maturity within 1 year and 1 year or more. |
Paragraph 75 |
5 |
HKMA ACF - Bank Deposits |
HKMA ACF - Deposits from bank customers. |
The ACF factors applicable to deposits, from banks, central banks, regional development banks, national development banks (NDB), multilateral development banks (MDB, with a remaining maturity of 1 year or less , are predefined as part of this assumption. This assumption applies a 50% ACF factor on the deposits from banks, central banks, regional development banks with a remaining maturity between 6 months to 1 year. It also applies a 0% ACF factor on the deposits from banks, central banks, regional development banks with open maturity, a remaining maturity of less than 6 months, and a remaining maturity of 1 year or more. |
Paragraphs 76, 77, 78 |
6 |
HKMA ACF - Bank Deposits - Cash Flow Basis |
HKMA ACF - Deposits from bank customers with a remaining maturity of more than 1 yr. and cash flow maturity of less than 1 year. |
The ACF factors applicable to deposits, from banks, central banks, regional development banks, national development banks (NDB), multilateral development banks (MDB), with a remaining maturity of more than 1 year with cash flow maturities within 1 year, are predefined as part of this assumption. This assumption applies a 0% ACF factor on the stable portion of cash flows with cash flow maturity within 1 year and 1 year or more. |
Paragraphs 76, 77, 78 |
7 |
HKMA ACF - Other funds - Other Parties |
HKMA ACF - Other funding from all customers, with residual maturity of less than 1 year. |
The ACF factor applicable to all funding other than deposits, with remaining maturity less than 1 year are predefined as part of this assumption. This assumption applies a 0% ACF factor on all funding other than deposits, with a remaining maturity of less than 6 months and between 6 months to 1 year. It applies a 100% ACF factor on all funding other than deposits, with a remaining maturity of 1 year or more. |
Paragraphs 76, 77, 78 |
8 |
HKMA ACF - Other Funds- Other Parties- Maturity over 1 yr. |
HKMA ACF - Other funding from all counterparties, with residual maturity of more than 1 year and cash flow maturity within 1 year. |
The ACF factor applicable to all funding other than deposits, with a remaining maturity of more than 1 year with cash flow maturity within 1 year, are predefined as part of this assumption. This assumption applies a 0%, 50%, 100% ASF Factor on all funding other than deposits, with cash flow maturity of less than 6 months, between 6 months to 1 year, and greater than 1 year. |
Paragraphs 76, 77, 78 |
9 |
HKMA ASF - Trade Date Payables |
HKMA ACF - Trade date payables arising from purchases of foreign currencies, financial instruments, and commodities that are expected to settle or have failed but are expected to settle within the standard settlement cycle. |
The ACF factor applicable to trade payable cash flows arising from purchases of foreign currencies, financial instruments, and commodities expected to settle within the standard settlement cycle, are predefined in this assumption. This assumption applies a 0% ACF factor on the trade payable cash flows. |
Paragraph 82 |
10 |
HKMA ASF - Liabilities with Open Maturity |
HKMA ACF - Secured deposits and all other borrowings and which do not have a stated maturity |
The ACF factor applicable to all the other funding without any stated maturity is predefined in this assumption. This assumption applies a 0% ACF factor on all the funding without any maturity. |
Paragraph 83 |
11 |
HKMA ACF - Borrowings and Liabilities - Maturity over 1 yr. |
HKMA ACF - Borrowings and liabilities with residual maturities and cash flows falling beyond 1 year. |
The ACF factors applicable to all other funding with a remaining maturity of greater than 1 year with cash flow maturity within 1 year, are predefined in this assumption. This assumption applies a 0% ACF factor on the cash flows. |
Paragraph 83 |
12 |
HKMA ASF - Debt Securities Issued |
HKMA ACF - Debt securities and prescribed instruments issued by the institution. |
The ACF factor applicable to debt securities and prescribed instruments issued by the institution are predefined in this assumption. This assumption applies a 0% and 50% ACF factor on debt securities, with residual maturity of less than 6 months and between 6 months to 1 year respectively. It applies a 100% ACF factor on debt securities with open maturity and maturity of 1 year or more. |
Paragraph 74 |
This section enlists all the preseeded assumptions acting on liabilities and capital items which receive an RCF factor.
Sl. No. |
Business Assumption Name |
Business Assumption Description |
Regulatory Requirement Addressed |
Regulatory Reference |
|---|---|---|---|---|
1 |
HKMA RCF - Coins and Banknotes |
HKMA RCF - Coins, banknotes, cash, and restricted cash held by the bank. |
The RCF factor applicable to coins, banknotes, and cash held by the bank, is predefined as a part of this assumption. This assumption applies a 0% RCF factor on the coins, banknotes, and cash held by the bank. |
Paragraph 84 |
2 |
BNM - RCF - Central bank reserves |
HKMA RCF - All central bank reserves, including, required reserves and excess reserves. |
The RCF factors applicable to required and excess central bank reserves are predefined as a part of this assumption. This assumption applies a 0% RCF factor to all central bank reserves. |
Paragraph 45 |
3 |
HKMA RCF - Unencumbered Claims on Central Banks |
HKMA RCF - Unencumbered loans and other claims on central banks |
The RCF factors applicable to fully performing unencumbered loans and claims on central banks, with a remaining maturity of less than 1 year, are predefined as part of this assumption. This assumption applies 0%, 50%, and 100% RCF factors to the loans and claims on central banks with a remaining maturity of less than 6 months, between 6 months and 1 year, and 1 year or more respectively. It also applies a 100% RCF factor to the loans and claims on central banks with open maturity. |
Paragraphs 91 , 92 |
4 |
HKMA RCF - Unencumbered Loans to Banks Secured by L1 Asset |
HKMA RCF - Unencumbered loans to banks where the loan is secured against Level 1 assets as defined in the LCR. |
The RCF factors applicable to the unencumbered loans given to banks, regional development banks (RDB), National Development banks (NDB), multilateral development banks (MDB) secured by a level 1 asset are predefined as a part of this assumption. The assumption applies RCF factor of 0%,50%,100% on the unencumbered secured loans given to banks, regional development banks (RDB), National Development banks(NDB), multilateral development banks (MDB) by level 1 asset with a remaining maturity of less than 6 months, 6 months to 1 year and 1 year or more respectively. It also applies a 100% RCF factor on the loans with open maturity. |
Paragraphs 91 , 92 |
5 |
HKMA RCF - Unencumbered Loans to Banks Secured by Non-L1 Asset |
HKMA RCF - Unencumbered loans to banks where the loan is secured against non-Level 1 asset as defined in the LCR. |
The RCF factors applicable to the unencumbered loans given to banks, regional development banks (RDB), National Development banks (NDB), multilateral development banks (MDB) secured by a non-level 1 asset are predefined as a part of this assumption. The assumption applies RCF factor of 0%,50%,100% on the unencumbered secured loans given to banks, regional development banks (RDB), National Development banks(NDB), multilateral development banks (MDB) by level 1 asset with a remaining maturity of less than 6 months, 6 months to 1 year and 1 year or more respectively. It also applies a 100% RCF factor on the loans with open maturity. |
Paragraphs 91 , 92 |
6 |
HKMA RCF - Unencumbered Unsecured Loans to Banks |
HKMA RCF - Unencumbered unsecured loans excluding overdrafts to banks. |
The RCF factors applicable to the unencumbered unsecured loans given to banks, regional development banks(RDB), National Development banks(NDB), multilateral development banks(MDB), are predefined as a part of this assumption. The assumption applies RCF factor of 0%, 50%, and 100% on the unencumbered unsecured loans given to banks, regional development banks(RDB), National Development banks (NDB), multilateral development banks (MDB), with a remaining maturity of fewer than 6 months, 6 months to 1 year and 1 year or more respectively. It also applies a 100% RCF factor on the loans with open maturity. |
Paragraphs 91 , 92 |
7 |
HKMA RCF - Unencumbered Loans to FIs Secured by L1 Asset |
HKMA RCF - Unencumbered loans to other parties excluding banks, central banks, regional development banks, MDBs, NDBs where the loan is secured against Level 1 assets as defined in the LCR. |
The RCF factors applicable on the unencumbered loans given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs secured by a level 1 asset are predefined as a part of this assumption. The assumption applies RCF factor of 0%,50%,100% on the unencumbered secured loans given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs by level 1 asset with a remaining maturity of less than 6 months, 6 months to 1 year and 1 year or more respectively. It also applies a 100% RCF factor on the loans with open maturity. |
Paragraphs 93 , 94 |
8 |
HKMA RCF - Unencumbered Loans to FIs Secured by Non-L1 Asset |
HKMA RCF - Unencumbered loans to other parties excluding banks, central banks, regional development banks, MDBs, NDBs where the loan is secured against non-Level 1 asset as defined in the LCR. |
The RCF factors applicable to the unencumbered loans given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs secured by a non-level 1 asset are predefined as a part of this assumption. The assumption applies RCF factor of 0%,50%,100% on the unencumbered secured loans given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs by non-level 1 asset with a remaining maturity of less than 6 months, 6 months to 1 year and 1 year or more respectively. It also applies a 100% RCF factor on the loans with open maturity. |
Paragraphs 93 , 94 |
9 |
HKMA RCF - Unencumbered Unsecured Loans to FIs |
HKMA RCF - Unencumbered unsecured loans to given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs, excluding overdrafts. |
The RCF factors applicable to the unencumbered unsecured loans given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs, are predefined as a part of this assumption. The assumption applies RCF factor of 0%, 50%, and 100% on the unencumbered unsecured loans given to all other parties excluding banks, central banks, regional development banks, MDBs, NDBs, with a remaining maturity of less than 6 months, 6 months to 1 year and 1 year or more respectively. It also applies a 100% RCF factor on the loans with open maturity. |
Paragraphs 93 , 94 |
10 |
HKMA RCF - Unencumbered Non HQLA Assets |
HKMA RCF - Unencumbered securities, with maturity less than 1 year, which does not qualify as High quality liquid assets under the LCR Rule |
The RCF factors applicable to unencumbered securities, with a remaining maturity of less than 1 year and which do not qualify, as High quality liquid assets under the LCR Rule, are predefined as part of this assumption. The assumption applies a 50% RCF factor on unencumbered securities, which do not qualify as High quality liquid assets under the LCR Rule, with a remaining maturity of less than 1 year |
Paragraphs 89, 90 |
11 |
HKMA RCF - Unencumbered Non HQLA Securities-Maturity over 1yr |
HKMA RCF - Unencumbered securities, with a maturity greater than 1 year which do not qualify as HQLA under the LCR Rule |
The RCF factors applicable to unencumbered securities, with a remaining maturity of more than 1 year and which do not qualify as High quality liquid assets under the LCR Rule, are predefined as part of this assumption. The assumption applies an 85% RCF factor on unencumbered securities, with a remaining maturity of more than 1 year and which do not qualify as High quality liquid assets under the LCR Rule. |
Paragraphs 89, 90 |
12 |
HKMA RCF - Listed Common Equities |
HKMA RCF - Common equities that are listed on the recognized stock exchange. |
The RCF factor applicable to Common equities that are listed on the recognized stock exchange is predefined in this assumption. This assumption applies a 100% ACF factor on Common equities. |
Paragraphs 89, 90 |
13 |
HKMA RCF - Unencumbered L1 Assets |
HKMA RCF - Unencumbered assets that qualify for inclusion in Level 1 of High quality liquid assets as defined in the LCR. |
The RCF factors applicable to unencumbered assets, which qualify for inclusion in Level 1 of High quality liquid assets as defined in the LCR, are predefined as a part of this assumption. The assumption applies a 0% RCF factor on the unencumbered Level 1 assets. |
Paragraph 89 |
14 |
HKMA RCF - Unencumbered L2A and L2B Assets |
HKMA RCF - Unencumbered assets that qualify for inclusion in Level 2A and 2B of High quality liquid assets as defined in the LCR. |
The RCF factors applicable to unencumbered assets, which qualify for inclusion in Level 2A, and 2B of High quality liquid assets as defined in the LCR, are predefined as a part of this assumption. The assumption applies a 0% RCF factor on the unencumbered Level 2A assets and Level 2B assets. |
Paragraph 89 |
15 |
HKMA RCF - Unencumbered Residential Mortgage Loans |
HKMA RCF - Unencumbered residential mortgage loans. |
The RCF factors applicable to unencumbered residential mortgage loans are per defined as part of this assumption. The assumption applies RCF factors of 0% and on the unencumbered residential mortgage loans. |
Paragraphs 93, 94 |
16 |
HKMA RCF - Trade Date Receivables |
HKMA RCF - Trade date receivables arising from purchases of foreign currencies, financial instruments, and commodities that are expected to settle or have failed but are expected to settle within the standard settlement cycle. |
The RCF factor applicable to trade date receivables arising from purchases of foreign currencies, financial instruments, and commodities that are expected to settle or have failed but are expected to settle within the standard settlement cycle, are predefined as part of this assumption. The assumption applies a 0% RCF factor to the trade receivables, which expected to settle within the settlement cycle. |
Paragraph 96 |
17 |
HKMA RCF - Unencumbered commodities |
HKMA RCF - Unencumbered physically traded commodities, including gold. |
The RCF Factor applicable to unencumbered physically traded commodities is defined as a part of this assumption. The assumption applies an 85% factor. |
Paragraph 85 |
18 |
HKMA RCF - Unencumbered Export Bills |
HKMA RCF - Unencumbered export bills. |
The RCF factor applicable to export bills is predefined in this assumption. This assumption applies a 0% and 50% ACF factor on debt securities, with residual maturity of less than 6 months and between 6 months to 1 year respectively. It applies a 100% ACF factor on debt securities with open maturity and maturity of 1 year or more. |
Paragraph 74 |
This section enlists all the preseeded assumptions for CFR Derivatives.
Sl. No. |
Business Assumption Name |
Business Assumption Description |
Regulatory Requirement Addressed |
Regulatory Reference |
|---|---|---|---|---|
1 |
HKMA ASF - Net CFR Derivative Liabilities |
HKMA ACF - derivative liabilities net of derivative assets, where derivative liability is net of any variation margin posted and the derivative asset is net of cash margin received. |
The ACF factor applicable to all derivative contracts including netted derivative contracts, where the net aggregate mark to the market value of the contracts for an entity including any variation margin adjustment is negative, is predefined as part of this assumption. The assumption applies a 0% ACF factor to the derivative liabilities net of derivative assets, where the net aggregate mark to the market value of the contracts is negative. |
Annexure1 |
2 |
HKMA RCF - Net NSFR Derivative Assets |
HKMA RCF - derivative assets net of derivative liabilities, where derivative liability is net of any variation margin posted and the derivative asset is net of cash margin received. |
The RCF factor applicable to all derivative contracts including netted derivative contracts, where the net aggregate mark to the market value of the contracts for an entity including any cash margin adjustment is positive, is predefined as part of this assumption. The assumption applies a 100% RCF factor to the derivative assets net of derivative liabilities, where the net aggregate mark to the market value of the contracts is positive. |
Annexure1 |
3 |
HKMA RCF - Margin for Derivatives |
HKMA RCF - Treatment of initial margin posted against derivative transactions. |
The RCF factor applicable to the initial margin posted for the derivative contracts is predefined as part of this assumption. The assumption applies an 85% RCF factor to the initial margin posted against the derivative contracts. |
Annexure1 |
This section enlists all the preseeded assumptions for CFR Off-Balance Sheet items.
Sl. No. |
Business Assumption Name |
Business Assumption Description |
Regulatory Requirement Addressed |
Regulatory Reference |
|---|---|---|---|---|
1 |
HKMA RCF - Credit and Liquidity Facilities to Client |
HKMA RCF- Off balance sheet exposures- Irrevocable, revocable and conditionally revocable credit and liquidity facilities offered to any clients by the bank. |
The RCF factor applicable to irrevocable, revocable, and conditionally revocable credit and liquidity facilities offered to any clients by the bank is predefined as part of this assumption. The assumption applies a 5% RCF factor to the undrawn amount of irrevocable and conditionally revocable credit and liquidity facilities and RCF factor of 0% in case of revocable credit and liquidity facilities. |
Annexure 2 |
2 |
HKMA RCF - Guarantees and Letters of Credit |
HKMA RCF- Off balance sheet exposures- Guarantees and letters of credit. |
The RCF factor applicable to the Guarantees and Letters of credit offered by the bank is predefined as part of this assumption. The assumption applies a 0% RCF factor to the EOP balance of the trade-related and non-trade related Guarantees and Letters of credit. |
Annexure 2 |
The application supports multiple pre-configured rules and scenarios based on HKMA specified scenario parameters such as inflow rates, outflow rates, run-offs, haircuts, and so on. See the Regulation Addressed through Business Rules for details.