1. User Guide
  2. Liquidity Coverage Ratio Calculation
  3. Process Flow
  4. Calculation of Cash Inflows and Outflows
  5. Cash flow Exclusions
  6. Cash Inflow computation

4.2.14.1.1 Cash Inflow computation

  1. Cash Inflow Exclusions
    The US Federal Reserve explicitly excludes the following cash flows from the denominator of LCR/modified LCR:
    • The deposits held by the bank, at other banks, for its own operational purposes, that is, the bank’s operational deposits
    • Amounts that the bank would receive from derivative transactions due to forward sale of mortgage loans or any derivatives that are mortgage commitments or pipeline
    • Undrawn amount of funding credit and liquidity lines received by the bank
    • The fair value of any asset included in the bank’s stock of HQLA as well as any inflows received from or with respect to such assets. For instance, inflows received from HQLA assets maturing within 30 days.
    • Any cash flows from a non performing asset or any asset that is expected to be non-performing within the LCR horizon
    • Cash flows from any account that does not have a contractual maturity or from an account whose maturity date is beyond the liquidity horizon
    • Any inflows or outflows from intragroup transactions are excluded. These include transactions between the following:
      • The legal entity at the level of which consolidation is being carried out that is, consolidation level and its subsidiaries
      • Any two subsidiaries in the immediate organization structure of the consolidation level entity
  2. Net Derivative Cash Inflow

    Net derivative cash flows refer to the cash inflows and outflows obtained from derivative contracts and their underlying collateral. These cash inflows include all payments that the bank is expected to receive from its counterparty as well as any collateral that is due to be received from the counterparty within the LCR horizon. If an ISDA master netting agreement is in place, then the payments and collateral due to the counterparty during the LCR horizon are off-set against the cash inflows. If the net exposure value is positive, it is considered a derivatives cash outflow and included in the outflow part of the denominator.

    Such inflows and outflows are offset against each other at a netting agreement level provided the payment netting indicator is Yes.

    The process of computing the derivative cash inflows and outflows is provided as follows:
    • The application checks if payment netting indicator is Yes for a given netting agreement. If Yes, sum all cash outflows (negative cash flows) and inflows (positive cash flows) denominated in a particular currency, occurring on each date from the instruments which are part of a particular netting agreement and the underlying collateral.
      • If the sum of cash flows is negative, then it is considered net derivative cash outflows.
      • If the sum of cash flows is positive, then it is considered net derivative cash inflows.
    • The application checks if payment netting indicator is No for a given netting agreement. If No, then
    • Sum all cash outflows denominated in a particular currency, occurring on each date from the instruments which are part of a particular netting agreement and the underlying collateral. This is considered net derivative cash outflow.
    • Sum all cash inflows denominated in a particular currency, occurring on each date from the instruments which are part of a particular netting agreement and the underlying collateral. This is considered net derivative cash inflow.
      • The net derivative cash outflow at a legal entity level equals the sum of all derivative cash outflows computed in step 1(i) and 2(i).
      • The net derivative cash outflow at a legal entity level equals the sum of all derivative cash outflows computed in step 1(ii) and 2(ii).
  3. Retail Cash Inflow Amount

    The cash inflows from retail customers or counterparties include contractually payable amounts multiplied by the regulator-specified inflow rate.

  4. Unsecured Wholesale Cash Inflow Amount

    Unsecured wholesale cash inflows include amounts contractually due from wholesale customers or counterparties, regulated and non-regulated financial companies, investment companies, non-regulated funds, pension funds, investment advisers, or identified companies, or from a consolidated subsidiary of any of the foregoing, or central banks.

  5. Securities Cash Inflow Amount

    The contractual payments due to the bank from non-HQLA securities that it owns are included as part of cash inflows.

  6. Secured Lending and Asset Exchange Cash Flows

    Inflows from secured lending transactions maturing within the LCR horizon are based on the collateral securing such transactions. The inflow rates increase in inverse proportion to the quality of the collateral and are related to the liquidity haircuts specified for such assets.

    Inflows from asset exchanges are determined based on the difference between the quality of the assets received and posted. If the assets to be posted by the bank to the counterparty at the maturity of the transaction are of lower quality than the assets that will be received from the counterparty, such asset exchanges result in cash inflows to the bank.

    The inflow and outflow rates are specified as part of the business assumptions UI.

  7. Segregated Account Inflow Amount
    A Covered Company’s broker-dealer segregated account inflow amount is the fair value of all assets released from broker-dealer segregated accounts maintained in accordance with statutory or regulatory requirements for the protection of customer trading assets, provided that the calculation of the broker-dealer segregated account inflow amount, for any transaction affecting the calculation of the segregated balance (as required by applicable law), is consistent with the following:
    • In calculating the broker-dealer segregated account inflow amount, the covered company must calculate the fair value of the required balance of the customer reserve account as of 30 calendar days from the calculation date by assuming that customer cash and collateral positions is changed consistent with the outflow and inflow calculations.
    • If the fair value of the required balance of the customer reserve account as of 30 calendar days from the calculation date, as calculated consistent with the outflow and inflow calculations, is less than the fair value of the required balance as of the calculation date, the difference is the segregated account inflow amount.
    • If the fair value of the required balance of the customer reserve account as of 30 calendar days from the calculation date, as calculated consistent with the outflow and inflow.
  8. Other Cash Inflow Amounts

    A Covered Company’s inflow amount as of the calculation date includes zero percent of other cash inflow amounts which are other than the inflows included in the following: Excluded Amount for Intragroup Transactions

    The inflow amounts mentioned do not include amounts arising out of transactions between the following:
    • The Bank and a consolidated subsidiary of the bank; or
    • A consolidated subsidiary of the bank and another consolidated subsidiary of the bank.
    All of the intra group transactions mentioned above are eliminated for the purpose of computing the Inflow Amount.