4.4.2 Regulation Addressed through Business Rules
The list of preconfigured rules and the corresponding reference to the regulatory requirement that it addresses are provided in the following table.
Note:
This list contains only the Rules, which directly correspond to regulatory references. For the complete set of Rules, T2T and Functions used in HKMA LCR, see the Run Chart.Table 3-11 Preconfigured HKMA LCR Business Rules
| Sl. No. | Rule Name | Rule Description | Regulatory Requirement Addressed | Regulatory Reference 1. HKMA Banking (Liquidity) Rules Capital 155 Sub leg Q 2. BIS BCBS 238- Basel iii - LCR and Liquidity Risk Monitoring Tools 3. MA(BS) 1 |
|---|---|---|---|---|
| 1 | LRM - HKMA - Classification Of Operational Deposits And Non-Operational Balance Computation | This rule classifies accounts as operational deposits based on guidelines and computes that portion of the EOP balance of such accounts, which is truly operational in nature. These values are updated in the FSI_LRM_INSTRUMENT table. | The classification of an account as operational or non-operational as per the guidelines and the computation of the operational portion of the EOP balance is configured as part of this rule. | HKMA Part 7- paragraph 25 |
| 2 | LRM - HKMA - HQLA Level 1 - Cash and Central Bank Reserve | This rule reclassifies cash, banknotes, and central bank reserves, to the extent that the central bank policies allow them to be drawn down in times of stress, as HQLA Level 1 assets in accordance with the criteria specified by HKMA. | The classification of cash and central bank reserves as HQLA level 1 assets is configured as part of this rule. |
HKMA Schedule 2 Part 2 1a and b Completion Instruction - A1(a),A1(b) |
| 3 | LRM - HKMA - HQLA Level 1 - Sovereign, CB , PSE and MDB Issued Zero Risk Weight Securities | This rule reclassifies marketable securities issued by sovereigns, central banks, PSEs, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, European Community, and multilateral development banks as HQLA Level 1 assets in accordance with the criteria specified by HKMA. | The classification of zero risk weight marketable securities issued by sovereigns, central banks, PSEs, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, European Community, and multilateral development banks as HQLA level 1 assets is configured as part of this rule. |
HKMA Schedule 2 Part 2 1c HKMA Schedule 2 Part 3 1 Completion Instruction - A1 |
| 4 | LRM - HKMA - HQLA Level 1 - Sovereign, CB , PSE and MDB Guaranteed Zero Risk Weight Securities | This rule reclassifies marketable securities guaranteed by sovereigns, central banks, PSEs, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, European Community, and multilateral development banks as HQLA Level 1 assets in accordance with the criteria specified by HKMA. | The classification of zero risk weight marketable securities guaranteed by sovereigns, central banks, PSEs, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, European Community, and multilateral development banks as HQLA level 1 assets is configured as part of this rule. |
HKMA Schedule 2 Part 2 1c HKMA Schedule 2 Part 3 1 Completion Instruction - A1 |
| 5 | LRM - HKMA - HQLA Level 1 - Sec by Sovereign and CB with Non-Zero Risk Weight in Domestic Currencies | This rule reclassifies securities issued by non-zero risk weight sovereigns and central banks as HQLA Level 1 assets in accordance with the criteria specified by HKMA. | The classification of securities issued in the domestic currency by non-zero risk weight sovereigns and central banks as HQLA level 1 assets is configured as part of this rule. |
HKMA Schedule 2 Part 2 1d HKMA Schedule 2 Part 3 2 Completion Instruction - A1(d) |
| 6 | LRM - HKMA - HQLA Level 1 - Sec by Sovereign and CB with Non-Zero Risk Weight in Foreign Currency | This rule reclassifies securities issued by non-zero risk weight domestic sovereigns and central banks in foreign currency as HQLA Level 1 assets in accordance with the criteria specified by HKMA. | The classification of securities issued in foreign currencies by non-zero risk weight domestic sovereigns and central banks as HQLA level 1 assets is configured as part of this rule. |
HKMA Schedule 2 Part 2 1e HKMA Schedule 2 Part 3 3 Completion Instruction - A1(e) |
| 7 | LRM - HKMA - HQLA Level 2A - Sovereign, CB , PSE and MDB 20 percent Risk Weight Securities | This rule reclassifies the non-zero risk weight securities either issued or guaranteed by Sovereign, Central Bank, PSE, and Multilateral Development Bank as HQLA Level 2A assets, in accordance with the criteria specified by HKMA. | The classification of 20% risk weight marketable securities guaranteed by sovereigns, central banks, PSEs, or multilateral development banks as HQLA Level 2A assets are configured as part of this rule. |
HKMA Schedule 2 Part 2-2a HKMA Schedule 2 Part 3 4 Completion Instruction - A2(a) |
| 8 | LRM - HKMA - HQLA Level 2A - Non-Financial Corporate Bonds | This rule reclassifies debt securities other than covered bonds issued by non-financial corporates as HQLA Level 2A assets in accordance with the criteria specified by HKMA. | The classification of corporate bonds, excluding covered bonds, as HQLA Level 2A assets is configured as part of this rule. |
HKMA Schedule 2 Part 2-2a HKMA Schedule 2 Part 3 4 Completion Instruction - A2(b) |
| 9 | LRM - HKMA - HQLA Level 2A - Covered Bonds | This rule reclassifies covered bonds issued by non-financial corporates as HQLA Level 2A assets in accordance with the criteria specified by HKMA. | The classification of covered bonds as HQLA Level 2A assets is configured as part of this rule. |
HKMA Schedule 2 Part 2-2b&c HKMA Schedule 2 Part 3 5&6 Completion Instruction - A2(c) |
| 10 | LRM - HKMA - HQLA Level 2B RMBS | This rule reclassifies residential mortgage-backed securities as HQLA Level 2B RMBS assets in accordance with the criteria specified by HKMA. | The classification of residential mortgage-backed securities as HQLA level 2B RMBS assets is configured as part of this rule. |
HKMA Schedule 2 Part 2- 3B HKMA Schedule 2 Part 3 8&9 Completion Instruction - A3(c) |
| 11 | LRM - HKMA - HQLA Level 2B Non-RMBS - Non-Financial Corporate Bonds | This rule reclassifies debt securities issued by non-financial corporates as HQLA Level 2B Non-RMBS assets in accordance with the criteria specified by HKMA. | The classification of debt securities, including commercial papers, issued by non-financial corporates as HQLA level 2B non-RMBS assets is configured as part of this rule. |
HKMA Schedule 2 Part 2- 3a HKMA Schedule 2 Part 3-7 Completion Instruction - A3(a) |
| 12 | LRM - HKMA - Bank Own Assets - Meets HQLA Operational Requirements Flag Update | This rule identifies whether the bank's own assets, both unencumbered assets as well as those placed as collateral, meet the operational requirements set forth by the regulator, except for being unencumbered in the case of placed collateral. In the case of unencumbered assets, it updates the Meets HQLA Operational Requirements Flag. In case of placed collateral, it updates the Meets HQLA Operational Requirements on Unwind Flag. | The identification of whether an asset owned by the bank meets the operational requirements set forth by BIS for its inclusion in the stock of HQLA is configured as part of this rule. | BIS Paragraphs 28 to 42 |
| 13 | LRM - HKMA - Re-hypothecated Mitigants - Meets HQLA Operational Requirements Flag Update | This rule identifies whether a rehypothecated mitigant meets the operational requirements set forth by the regulator, except for being unencumbered. It updates the Meets HQLA Operational Requirements on Unwind Flag for such mitigants. | The identification of whether collateral received from a counterparty that is further placed as collateral meets the operational requirements set forth by BIS on unwinding is configured as part of this rule. | BIS Paragraphs 28 to 42 |
| 14 | LRM - HKMA - Mitigants - Meets HQLA Operational Requirements Flag Update | This computation rule updates the HQLA Eligibility Flag for the bank’s own unencumbered assets classified as HQLA that fulfill the HQLA operational requirements and therefore can be included in the stock of HQLA. It also updates the Eligible HQLA on the Unwind flag for all assets placed as collateral that are classified as HQLA that fulfill the HQLA operational requirements on unwinding and therefore are to be unwound. | This computation rule updates the HQLA Eligibility Flag for bank’s own unencumbered assets classified as HQLA that fulfill the HQLA operational requirement. | BIS Paragraphs 28 to 42 |
| 15 | LRM - HKMA - Mitigants - Eligible High Quality Liquid Assets Flag Update | This computation rule updates the HQLA Eligibility Flag for mitigants classified as HQLA that fulfill the HQLA operational requirements and therefore can be included in the stock of HQLA. | The identification of whether a Mitigant is eligible to be included in the stock of HQLA is done as a part of this Rule. | BIS Paragraphs 28 to 42 |
| 16 | LRM - HKMA Level 1 Stock Adjustment - Secured Funding Transaction-Addition | This rule reclassifies all secured funding transactions that mature within the LCR horizon and therefore are required to be unwound, where the collateral posted is a level 1 asset to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA, due to such an unwind, as the addition of the collateral posted. | The identification of secured funding transactions required to be unwound and the amount to be added to the stock of level 1 assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 17 | LRM - HKMA Level 1 Stock Adjustment - Secured Funding Transaction-Deduction | This rule reclassifies all the secured funding transactions that mature within the LCR horizon and therefore are required to be unwound, where the collateral posted is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the amount received. | The identification of secured funding transactions required to be unwound and the amount to be deducted from the stock of level 1 assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 18 | LRM - HKMA Level 1 Stock Adjustment - Secured Lending Transaction-Addition | This rule reclassifies all the secured lending transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the addition of the amount paid. | The identification of secured lending transactions required to be unwound and the amount to be added to the stock of level 1 assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 19 | LRM - HKMA Level 1 Stock Adjustment - Secured Lending Transaction-Deduction | This rule reclassifies all the secured lending transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 1 asset, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the collateral received. | The identification of secured lending transactions required to be unwound and the amount to be deducted from the stock of level 1 assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 20 | LRM - HKMA Level 1 Stock Adjustment - Asset Exchange Addition | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is an HQLA and the collateral posted is a level 1 asset, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the addition of the collateral posted. | The identification of asset exchange transactions required to be unwound and the amount to be added to the stock of level 1 assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 21 | LRM - HKMA Level 1 Stock Adjustment - Asset Exchange Deduction | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 1 asset and the collateral posted is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the collateral received. | The identification of asset exchange transactions required to be unwound and the amount to be deducted from the stock of level 1 assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 22 | LRM - HKMA Level 2A Stock Adjustment - Secured Funding Transaction | This rule reclassifies all secured funding transactions that mature within the LCR horizon and therefore are required to be unwound, where the collateral posted is a level 2A asset, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA, due to such an unwind, as the addition of the collateral posted. | The identification of secured funding transactions required to be unwound and the amount to be added to the stock of level 2A assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 23 | LRM - HKMA Level 2A Stock Adjustment - Secured Lending Transaction | This rule reclassifies all the secured lending transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 2A asset, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the collateral received. | The identification of secured lending transactions required to be unwound and the amount to be deducted from the stock of level 2A assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 24 | LRM - HKMA Level 2A Stock Adjustment - Asset Exchange Addition | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 2A asset and the collateral posted is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwinds as the addition of the collateral received. | The identification of asset exchange transactions required to be unwound and the amount to be added to the stock of level 2A assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 25 | LRM - HKMA Level 2A Stock Adjustment - Asset Exchange Deduction | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 2A asset and the collateral posted is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the collateral received. | The identification of asset exchange transactions required to be unwound and the amount to be deducted from the stock of level 2A assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 26 | LRM - HKMA Level 2B RMBS, Non-RMBS Stock Adjustment - Secured Lending Transaction | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is an HQLA and the collateral posted is a level 2A asset, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the addition of the collateral posted. | The identification of secured lending transactions required to be unwound and the amount to be deducted from the stock of level 2B RMBS and non-RMBS assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 27 | LRM - HKMA Level 2B RMBS,Non RMBS Stock Adjustment - Secured Funding Transaction | This rule reclassifies all the secured lending transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 2B asset, either RMBS or non-RMBS, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the collateral received. | The identification of secured funding transactions required to be unwound and the amount to be added to the stock of level 2B RMBS and non-RMBS assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 28 | LRM - HKMA Level 2B RMBS,Non RMBS Stock Adjustment - Asset Exchange Addition | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 2B asset, either RMBS or non-RMBS, and the collateral posted is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the addition of the collateral received. | The identification of asset exchange transactions required to be unwound and the amount to be added to the stock of level 2B RMBS and non-RMBS assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 29 | LRM - HKMA Level 2B RMBS,Non RMBS Stock Adjustment - Asset Exchange Deduction | This rule reclassifies all the asset exchange transactions that mature within the LCR horizon and therefore are required to be unwound, where the mitigant received is a level 2B asset, either RMBS or non-RMBS, and the collateral posted is an HQLA, to the appropriate adjustment rule. It updates the type of adjustment to the stock of HQLA due to such an unwind as the deduction of the collateral received. | The identification of asset exchange transactions required to be unwound and the amount to be deducted from the stock of level 2B RMBS and non-RMBS assets due to such an unwind is configured as part of this rule. |
BIS- Annex 1 HKMA Part 7- paragraphs 32-35 |
| 30 | LRM - NCOF Computation | This rule computes the net cash outflow over the liquidity horizon based on the regulatory formula at the legal entity level as well as a legal entity - significant currency level and updates these values in the FCT_LRM_LE_SUMMARY table. | The computation of the net cash outflows as per the regulatory formula is configured as part of this rule. | HKMA Part 7 Paragraphs 39 to 42 |
| 31 | LRM - HKMA - Level 2B Asset Cap Amount Calculation | This rule calculates the adjusted level 2B asset cap amount as per the regulatory formula using the adjusted amounts of high-quality liquid assets and updates it in the FCT_LRM_LE_SUMMARY table at both legal entity level and legal entity - significant currency level. | The computation of the adjustment for 15% cap on level 2B assets is configured as part of this rule. | HKMA Part 7- paragraphs 18-24 |
| 32 | LRM - HKMA - Level 2 Asset Cap Amount Calculation | This rule calculates the adjusted level 2 asset cap amount as per the regulatory formula using the adjusted amounts of high-quality liquid assets and the adjusted level 2B cap amount. This value is updated in the FCT_LRM_LE_SUMMARY table at both the legal entity level and legal entity - significant currency level. | The computation of the adjustment for 40% cap on Level 2 assets is configured as part of this rule. | HKMA Part 7- paragraphs 18-24 |
| 33 | LRM - Stock of High Quality Liquid Asset Computation | This rule calculates the stock of high-quality liquid assets (HQLA) and updates the value in the FCT_LRM_LE_SUMMARY table at MASh legal entity level and legal entity - significant currency level. | The computation of the stock of high-quality liquid assets is configured as part of this rule. | HKMA Part 7- paragraphs 18-24 |
| 34 | LRM - Liquidity Coverage Ratio Computation | This rule calculates the liquidity coverage ratio (LCR) at a legal entity level and legal entity – significant currency level on a solo and consolidated basis and updates the values in the FCT_LRM_LE_SUMMARY table. | The computation of the liquidity coverage ratio is configured as part of this rule. | HKMA Part 7- paragraphs 18-24 |