Minimum Liquid Asset (MLA) addresses the liquidity requirements of a bank or financial institution that are neither headquartered in Singapore nor are domestic systematically important banks.
Topics:
· Preconfigured MAS Regulatory MLA Scenarios
This section details the MLA calculation process flow.
Topics:
· Identifying and Treating Qualifying Liabilities
· Calculating Minimum Assets Ratio
Qualifying liabilities are defined as liabilities that qualify to be fully included as part of the liabilities while computing Minimum Liquid Assets (MLA). Following are included under qualifying liabilities:
1. All liabilities, except bills of exchange, lines of credit, letters of credit and stored value facilities, from customers, other than banks and central banks.
2. All liabilities, except bills of exchange, lines of credit, letters of credit and stored value facilities, from central banks.
3. All liabilities, except bills of exchange, lines of credit, letters of credit and stored value facilities, from banks.
4. Lines of credit and letters of credit that are irrevocable.
5. Liabilities of the bank arising from stored value facilities.
6. Liabilities from bills of exchange that fulfill any of the following criteria:
§ Are trade transactions between Singapore domiciled parties
§ Are used for services
§ Are switch transactions between non-Singapore domiciled parties, financed locally after the switch
§ Are overdue and substituted by roll-over
§ Are used for import and financed by the seller
§ Where an invoice is already settled but has not been produced before the legal entity
100 % of the value of qualifying liabilities is included in the stock of qualifying liabilities.
All assets, whether owned by the bank or received from counterparties as collateral, that fulfill the liquid asset criteria specified by MAS, are classified as follows:
· Tier 1 Assets
· Tier 2 Assets
Topics:
· Identifying and Treating Tier 1 assets
· Identifying and Treating Tier 2 assets
Tier 1 assets are assets which qualify to be fully included as part of the stock of liquid assets while computing MLA. They include:
1. Cash which includes coins, banknotes, and restricted cash. The value included in the stock of liquid assets is the cash balance.
2. Balances with the Central Bank of Singapore
3. Debt Security or Sukuk rated greater than or equal to AA- and issued by sovereigns or central banks.
4. Sukuk rated greater than or equal to AA and issued by Singapore Sukuk Pte. Ltd.
5. Debt Security or Sukuk, rated greater than or equal to AA- and issued by sovereigns or central banks, that are held under reverse repo.
100 % of the value of Tier 1 liquid assets is included in the stock of liquid assets.
Tier 2 assets are assets which qualify to be fully included as part of the stock of liquid assets for MLA computation. They include:
1. Debt Security or Sukuk issued by the statutory board of Singapore. If the legal entity’s holding is less than or equal to 20% of the issue size, then 90% of market value is included, whereas if holding more than 20%, then 50% of market value is included in the stock of liquid assets.
2. Debt Security or Sukuk rated AAA- issued by Bank for International Settlements and PSE. If the legal entity’s holding is less than or equal to 20% of the issue size, then 100% of market value is included, whereas if the holding is more than 20%, then 50% of market value is included in the stock of liquid assets.
3. Debt Security or Sukuk rated AAA- issued by corporates and guaranteed by non-Singapore sovereigns. If the legal entity’s holding is less than or equal to 20% of issue size then 100% of market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
4. Debt Security or Sukuk rated AAA to AA- or short term rated as A-1, issued by sovereigns, statutory board, Bank for International Settlements, International Monetary Fund, European Central Bank, European Community, and Multilateral Development Banks. If the legal entity’s holding is less than or equal to 20% of issue size then 90% of market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
5. Debt Security or Sukuk rated AAA to AA- or short term rated as A-1, issued by corporates and guaranteed by non-Singapore sovereigns. If the legal entity’s holding is less than or equal to 20% of issue size then 90% of market value is included, whereas if the holding more than 20% then 50% of market value is included in the stock of liquid assets.
6. Debt Security or Sukuk rated A- to A+ or short term rated as A-2, issued by sovereigns, statutory boards, Bank for International Settlements, International Monetary Fund, European Central Bank, European Community, and Multilateral Development Banks. If the legal entity’s holding is less than or equal to 20% of issue size then 80% of market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
7. Debt Securities or Sukuk rated A- to A+ or short term rated as A-2 issued by corporates and guaranteed by non-Singapore sovereigns. If the legal entity’s holding is less than or equal to 20% of the issue size then 80% of the market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
8. Debt Securities or Sukuk rated BBB to BBB+, or short term rated as A-3 issued by sovereigns, statutory boards, Bank for International Settlements, International Monetary Fund, European Central Banks, European Community, and Multilateral Development Banks. If the legal entity’s holding is less than or equal to 20% of the issue size then 70% of market value is included, whereas if the holding more than 20% then 50% of market value is included in the stock of liquid assets.
9. Debt Securities or Sukuk rated BBB to BBB+ or short term rated as A-3, issued by corporates and guaranteed by non-Singapore sovereigns. If the legal entity’s holding is less than or equal to 20% of the issue size then 70% of market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
10. Debt Securities rated AAA to AA- or short term rated as A-1 issued by banks. If the legal entity’s holding is less than or equal to 20% of the issue size then 90% of market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
11. Debt Securities rated A- to A+ or short term rated as A-2, issued by banks. If the legal entity’s holding is less than or equal to 20% of issue size then 80% of market value is included, whereas if holding more than 20% then 50% of market value is included in the stock of liquid assets.
12. Debt Security rated BBB to BBB+ or short term rated as A-3, issued by banks. If the legal entity’s holding is less than or equal to 20% of the issue size then 70% of market value is included, whereas if the holding is more than 20% then 50% of market value is included in the stock of liquid assets.
13. Debt Security rated AAA to AA- or short term rated as A-1 issued by corporates that are not covered earlier. If the legal entity’s holding is less than or equal to 20% of issue size then 90% of the market value is included, whereas if the holding is more than 20% then 50% of the market value is included in the stock of liquid assets.
14. Debt Security rated A- to A+ or short term rated as A-2 issued by corporates that are not covered earlier. If the legal entity’s holding is less than or equal to 20% of the issue size then 80% of the market value is included, whereas if holding more than 20%, then 50% of the market value is included in the stock of liquid assets.
15. Debt Security rated BBB to BBB+ or short term rated as A-3 issued by corporates that are not covered earlier. If the legal entity’s holding is less than or equal to 20% of the issue size then 70% of the market value is included, whereas if the holding is more than 20% then 50% of the market value is included in the stock of liquid assets.
16. For Bills Receivable and Bills Purchase and Discounted in Singapore dollars, 100% of the book value is included in the stock of liquid assets.
MLA is calculated as follows:
1. The application calculates the total stock of qualifying liabilities by taking the sum of all the qualifying liabilities mentioned in the Identification and Treatment of Qualifying Liabilities section.
2. The application calculates the stock of liquid assets by taking the sum of Tier 1 assets and tier 2 assets. The value of Tier 1 and 2 assets to be included in the total stock according to the Identification of Liquid Assets section.
3. The application calculates the Minimum Liquid Asset Ratio by dividing the Total Stock of Qualifying Liabilities by Total Stock of Liquid Assets.
OFS LRRCMAS supports a ready-to-use MAS MLA which has the regulatory scenario preconfigured in the form of business assumptions or rules. This section explains the business rules along with the corresponding regulatory reference.
NOTE:
This section provides only contextual information about business assumptions. For more detailed information, see the OFS LRS application (UI). For detailed Processes and Tasks, see the Run Chart.
The following table lists the Document Identifiers provided in the Regulatory Reference column of the Regulations Addressed through Business Rules section.
Regulation Reference Number |
Document Number |
Document Name |
Issued Date |
|---|---|---|---|
MC |
MAS Notice 649 |
MAS Notice 649 Minimum Liquid Assets and Liquidity Coverage Ratio |
28 Nov 14 |
The list of preconfigured business rules and assumptions as well as the corresponding reference to the regulatory requirement that it addresses are provided in the tables listed in the Regulations Addressed through Business Rules section.
The Regulatory Reference column for each rule or assumption has reference to the name of the Document Identifiers such as MC and should be read in conjunction with the Document Identifier listed in the preceding table.
The application supports multiple preconfigured rules and scenarios based on MAS specified scenario parameters such as inflow rates, outflow rates, Run-offs, haircuts, and so on.
Sl. No. |
Rule Name |
Rule Description |
Regulatory Requirement Addressed |
|---|---|---|---|
Tier 1 |
|||
1 |
MAS MLA- Reclassification- Tier 1- Cash, Central Bank Reserves and Bank Notes |
This rule classifies the liquid assets as Tier 1 where the standard product type is cash, central bank reserves, and banknotes. |
The classification of cash, banknotes, and Singapore's central bank reserves as Tier 1 asset is configured as part of this rule. |
2 |
MAS MLA- Reclassification- Tier 1- Debt securities |
This rule classifies the liquid assets as Tier 1 where the standard product type is debt securities, treasury bills, and Sukuk. |
The classification of greater than AA- rated debt securities issued by sovereigns or central banks, and Sukuk issued by Singapore Sukuk Pte Ltd. as Tier 1 assets are configured as part of this rule. |
3 |
MAS MLA- Reclassification- Tier 1- Debt securities held under reverse repo |
This rule classifies the liquid assets as Tier 1 where Debt securities held under reverse repo. |
The classification of AA- rated debt securities issued by sovereigns or central banks and Sukuk issued by Singapore Sukuk Pte Ltd., which are received as collateral under repurchase agreement as Tier 1 assets are configured as part of this rule. |
Tier 2 |
|||
4 |
MAS MLA- Reclassification- Tier 2- Debt securities issued by statutory boards |
This rule classifies the liquid assets as Tier 2 where debt securities issued by statutory boards. |
The classification of debt securities and Sukuk issued by statutory boards of Singapore as Tier 2 assets are configured as part of this rule. |
5 |
MAS MLA- Reclassification- Tier 2- Debt securities guaranteed by the sovereign, issued by super nationals |
This rule classifies the liquid assets as Tier 2 where debt securities guaranteed, issued by super nationals. |
The classification of AAA-rated debt securities and Sukuk issued by Bank for International Settlements and PSE as Tier 2 assets are configured as part of this rule. Additionally, the classification of AAA-rated corporate debt securities that are guaranteed by the sovereign, as Tier 2 assets are configured as part of this rule. |
6 |
MAS MLA- Reclassification- Tier 2- Debt securities issued by a sovereign or super nationals |
This rule classifies the liquid assets as Tier 2 where the debt securities are issued by sovereigns or super national. |
The classification of debt securities and Sukuk rated AAA to BBB- or short term rated A-1 to A-3, issued by sovereigns, statutory boards, Bank for International Settlements, International Monetary Fund, European Central Bank, European Community, and Multilateral Development, as Tier 2 assets are configured as part of this rule. |
7 |
MAS MLA- Reclassification- Tier 2- Corporate debt securities guaranteed by a sovereign |
This rule classifies the liquid assets as Tier 2 where corporate debt securities are guaranteed by sovereign. |
The classification of debt securities and Sukuk rated AAA to BBB- or short term rated A-1 to A-3, having outstanding issue size greater than 200 Singapore dollars, that are guaranteed by the sovereign, as Tier 2 assets are configured as part of this rule. |
8 |
MAS MLA- Reclassification- Tier 2- Debt securities issued by banks and other corporate |
This rule classifies the liquid assets as Tier 2 where debt securities are issued by banks and corporates. |
The classification of debt securities and Sukuk rated AAA to BBB- or short term rated A-1 to A-3, issued by banks, having outstanding issue size greater than 200 Singapore dollars, as Tier 2 assets are configured as part of this rule. |
9 |
MAS MLA- Reclassification- Tier 2- Bills of Exchange |
This rule classifies the liquid assets as Tier 2, which are issued by bills of exchange. |
The classification of bills purchase and discounted and bills receivable as Tier 2 assets are configured as part of this rule. |
Qualifying Liabilities |
|||
10 |
MAS MLA- Reclassification- Qualifying Liabilities- Issued bills of exchange |
This Rule classifies the Qualifying Liabilities - Issued by bills of exchange. |
The classification of bills of exchange issued by a bank as qualifying liabilities assets under the MLA regime is configured as part of this rule. |
11 |
MAS MLA- Reclassification- Qualifying Liabilities- Issued bills of exchange- Overdue |
This Rule classifies the Qualifying Liabilities- Issued by bills of exchange which has overdue in bills of exchange. |
The classification of bills of exchange issued by a bank that are overdue and are rolled-over, as qualifying liabilities under the MLA regime is configured as part of this rule. |
12 |
LRM - MLA Qualifying Liabilities -All Liabilities Except central bank and banks |
This rule classifies the qualifying liabilities for all liabilities except central bank and banks. |
The classification of all the liabilities other than dues to central banks and banks, as qualifying liabilities under the MLA regime, is configured as part of this rule. |
13 |
LRM - MLA Qualifying Liabilities -All assets Except Bills of Exchange |
This rule classifies the qualifying liabilities for all assets except bills of exchange. |
The classification of all the assets due to central banks and banks on a gross basis is configured as part of this rule. |
14 |
LRM - MLA Qualifying Liabilities -Central bank and banks |
This rule classifies the qualifying liabilities for the central bank and banks. |
The classification of all the liabilities due to central banks and banks on a net basis that is after subtracting any claims on the central bank and bank respectively, as qualifying liabilities under the MLA regime is configured as part of this rule. |
15 |
LRM - MLA Qualifying Liabilities -Line of Credit, LC, and SVF |
This rule classifies the qualifying liabilities for the line of credit, LC and SVF. |
The classification of lines of credit and letters of credit that are irrevocable, as qualifying liabilities under the MLA regime is configured as part of this rule. Additionally, liabilities of the bank arising from stored value facilities are also configured as part of this rule. |
16 |
MAS MLA-Value to be included in the Stock of Liquid Asset |
This rule updates the stock of liquid asset in the FSI_LRM_INSTRUMENT table. |
The computation of the value of the total stock of eligible liquid assets is configured as part of this rule. |
17 |
MAS MLA-Mitigant Value to be included in the Stock of Liquid Asset |
This rule updates the mitigant value to be included in the stock of liquid assets in the FSI_LRM_INSTRUMENT table. |
The identification and computation of the value of the non-rehypothecated portion of liquid asset collateral received under rehypothecation rights are configured as part of this rule. |