6.1.6.2 Forward Cash Flow Allocation

In case of the Cash Flow Download method, the cash flows are obtained at a less granular level i.e. at the level specified in section Granularity of Forward Records. The application allocates these cash flows to the granularity required for computing LCR. The steps involved in allocating cash flows to a more granular level are as follows:

1. The dimensional combinations based on which Cash Flow Download method is mapped are identified.
2. The cash flows obtained as of each forward date are bucketed based on the Time Bucket Definition selected as part of the forward date liquidity risk Run.
3. The dimensional combination to which each forward cash flow is to be allocated is identified. The allocation granularity is the dimensions that are available as part of the Fact Aggregate Cash Flow table.
4. The application computes the current profile of all spot cash flows, which corresponds to each download dimensional combination, at the granularity available in Fact Aggregate Cash Flow table i.e. the allocation dimension granularity including the level 0 time bucket.
5. The application applies the current profile percentage calculated as part of step 4 to the corresponding forward cash flows computed at the download dimension level to compute the allocation amount. The granularity of allocation is the same as that available in Fact Aggregate Cash Flow table.

   The forward cash flow allocation process is illustrated below. Suppose the following forward cash flows are obtained at the Product – Customer Type dimensional combination as of the forward date 25th February 2016:

   Table 5-27 Forward cash flow allocation process

   Product	Customer Type	Forward Cash Flow Date	Forward Cash Flows
   Loans	Retail	26-Feb-15	15
   Loans	Retail	27-Feb-15	20
   Loans	SME	26-Feb-15	30
   Loans	SME	27-Feb-15	15

   The bucketed current cash flows and forward cash flows for this dimensional combination are as follows:

   Table 5-28 Bucketed current cash flows and forward cash flows

   Inputs				Calculation
   Product	Customer Type	Current Cash Flows		Forward Cash Flows
   		1-1 Day (a)	2-2 Day (b)	1-1 Day (c)	2-2 Day (d)
   Loans	Retail	10	25	15	20
   Loans	SME	20	15	30	15

   This illustration assumes that the most granular dimensional combination for computation is Product – Customer Type – Currency. The current cash flow available for this granular dimensional combination is provided below. The application computes the current profile and allocates forward cash flows to the granular combinations as follows:

   Table 5-29 Current Profile Computation

   Inputs					Calculation
   Product	Customer Type	Currency	Current Cash Flow		Current Profile	Allocated Forward Cash flow
   			1-1 Day (e)	2-2 Day (f)	1-1 Day [g = e ¸ a]	2-2 Day [h= f ¸ b]	1-1 Day (c * g)	2-2 Day (d * h)
   Loans	Retail	USD	5	10	0.50	0.40	7.50	8.00
   Loans	Retail	GBP	5	15	0.50	0.60	7.50	12.00
   Loans	SME	USD	9	9	0.45	0.60	13.50	9.00
   Loans	SME	GBP	11	6	0.55	0.40	16.50	6.00

Note:

This allocation process is applicable only when the cash flow calculation method is selected as ‘Cash Flow Download’