1. Liquidity Risk Regulatory Calculations for Hong Kong Monetary Authority User Guide
  2. Liquidity Coverage Ratio Calculation
  3. Ratio Constituents
  4. Identification of Asset Levels
  5. Identifying and Treating Level 2B RMBS Assets

4.3.1.3 Identifying and Treating Level 2B RMBS Assets

The application identifies the following assets as HQLA Level 2B RMBS Assets:

Residential Mortgage-Backed Securities, which are marketable and satisfy the following criteria:
  • Issuer type is not the bank itself for which the computations are being carried out or any of its affiliated entities (in case of covered bonds).
  • Price has not decreased or haircut has not increased by more than 20% over 30 days during a relevant period of significant liquidity stress, which is specified by the bank.
  • Has an underlying Loan to Value Ratio of less than or equal 80%.
  • Has either a long-term credit score of 1, or if the long-term rating is not available, then a short-term credit score of 1.

Note:

The credit score is a computed value based on the Credit ratings of the Instrument or Issuer or Guarantor of the securities. This classification process is documented in the Credit Quality Grade section.

Assets classified as HQLA Level 2B RMBS are assigned a 25% haircut under the regulatory scenario prescribed by HKMA.