4.6.1.6 Calculation of Buffer Requirement

As per the Dodd-Frank guidelines, Bank Holding Companies (BHCs) and Foreign Banking Organizations (FBOs) are expected to conduct stress tests across multiple horizons to assess the potential impact of liquidity stress scenarios on their cash flows, liquidity position, profitability, and solvency. The buffer requirement is computed based on the stressed cash flows. US BHCs must maintain a minimum buffer equal to the net stressed cash flow need across 30 days. And US IHCs of FBOs must maintain a minimum buffer equal to the net stressed cash flow need across 30 days while US Branches and Agencies of FBOs must maintain a minimum of buffer equal to the net stressed cash flow need across 14 days. In case of FBOs, the external stressed cash flow sources must only be used to cover the external stressed cash flow needs. OFS LRM supports the calculation of buffer requirement for US BHCs as well as FBOs as per the procedure given below. Since these calculations differ, the application identifies whether the BHC is US based or is an FBO by looking up the domicile of the BHC and then automatically selects the relevant computational process.