4.2.7 Identification and Treatment of Pledged Deposits
A deposit is considered a pledged deposit when it is placed as a security against a loan(s) extended by the bank. It indicates that, when a customer receives a loan from a bank and contractually places the deposits held within the same bank as collateral, then the bank marks the respective deposits as pledged deposits.
For pledged deposits, the pledged portion of the deposit proceeds are paid out only when the loan against the deposit is repaid in full. Multiple deposits can be placed against multiple lien, such as loans, line of credit, guarantees and so on forming a many to many relationship.
The outflows for pledged deposits which will not mature within the LCR horizon may be excluded from the LCR calculation if the following conditions are met:
- The loan will not mature or settle in the next 30 days
- The pledge arrangement is subject to a legally enforceable contract disallowing withdrawal of the deposit before the loan is fully settled or repaid
- The amount of deposit to be excluded cannot exceed the outstanding balance of the loan