1. User Guide
  2. Liquidity Coverage Ratio Calculation
  3. Modified Liquidity Coverage Ratio Calculation
  4. Process Flow
  5. Consolidation as per Modified LCR Approach

4.4.1.3 Consolidation as per Modified LCR Approach

Consolidation for a modified BHC is done as per the procedure detailed in the following sections.
  1. In case of US Consolidated Subsidiaries Subject to Modified LCR Requirements In case of a US based legal entity that is a consolidated subsidiary of a modified LCR parent company, consolidation is done as follows:
    1. The application identifies whether the subsidiary is a US consolidated subsidiary.
    2. If condition (i) is fulfilled, it identifies whether the US consolidated subsidiary is subject to modified LCR requirement that is, whether the subsidiary in question is a regulated entity.
    3. If condition (ii) is fulfilled, then it calculates the net cash outflow based on the US Federal Reserve modified LCR approach that is, based on the cumulative cash flows on the 30th day, eliminating inter-company transactions at the level of the consolidated subsidiary.
    4. Consolidates post-haircut restricted HQLA to the extent of the consolidated subsidiary’s net cash outflow that is, to the extent required to satisfy modified LCR requirements of that subsidiary as part of the modified parent company’s HQLA.
    5. Consolidates the entire amount of post-haircut unrestricted HQLA held at the consolidated subsidiary as part of the modified parent company’s HQLA.
    6. Consolidates all cash inflows and outflows which are part of the net cash flow calculation.
  2. In case of US Consolidated Subsidiaries Not Subject to Modified LCR Requirements
    1. The application identifies whether the subsidiary is a US consolidated subsidiary.
    2. If condition (i) is fulfilled, it identifies whether the US consolidated subsidiary is subject to modified LCR requirement that is, whether the subsidiary in question is a regulated entity.
    3. If condition (ii) is not fulfilled, it eliminates all inter-company transactions till the level of the immediate parent of the consolidated subsidiary and then calculates the net cash outflow based on the US Federal Reserve modified LCR approach that is, based on the cumulative cash flows on the 30th day.
    4. Consolidates post-haircut restricted HQLA to the extent of the consolidated subsidiary’s net cash outflow and the entire amount of post-haircut unrestricted HQLA as part of the modified parent company’s HQLA.
    5. Consolidates all cash inflows and outflows which are part of the net cash flow calculation.
  3. In case of Non-US Consolidated Subsidiaries
    1. The application identifies whether the subsidiary is a US consolidated subsidiary.
    2. If condition (i) is not fulfilled, it eliminates all inter-company transactions till the level of the immediate parent of the consolidated subsidiary and then calculates the net cash outflow based on the US Federal Reserve modified LCR approach that is, based on the cumulative cash flows on the 30th day.
    3. The application consolidates post-haircut restricted HQLA to the extent of the consolidated subsidiary’s net cash outflow and the entire amount of post-haircut unrestricted HQLA as part of the modified parent company’s HQLA.
    4. The application consolidates all cash inflows and outflows which are part of the net cash flow calculation. These steps are repeated for each level in the organization structure, till the final consolidation level as selected in the Run is reached. The Consolidated HQLA calculated at the level of the immediate subsidiary of the BHC is added to the HQLA held by the BHC. All intercompany cash flows are eliminated and the LCR is calculated in accordance with the modified LCR approach.