5.2 Ratio Constituents

LMR is a ratio of assets over liabilities as prescribed in the HKMA guidelines. It considers certain assets and liabilities, referred to as liquefiable assets and qualifying liabilities.

Figure 4-2 Liquidity Maintenance Ratio

Where:

Total Liquefiable Assets

= Sum of all Liquefiable Assets (Post Haircut)

- Deductions from Liquefiable Assets (Post Haircut)

Total Qualifying Liabilities

= Sum of all Qualifying liabilities (Post Haircut)

- Deductions from Qualifiable Liabilities (Post Haircut)

The Constituents of the ratio are identified through pre-configured business rules. See the Regulation Addressed through Business Rules section for details.

The haircuts applicable to each asset or liability are applied through pre-configured business assumptions. See the Regulation Addressed through Business Assumptions section for details.