4.2.1 Identification of Asset Levels

Assets classified as “available-for-sale” or “held-to-maturity” are included in the stock of HQLA provided they fulfill the following HQLA criteria:

• Are unencumbered
• Meet the operational HQLA requirements
• Are not client pool securities that are held in segregated accounts or cash received from a repurchase agreement on client pool securities held in a segregated account
• If consolidated, then the portion of assets required to cover the consolidated subsidiary’s net cash outflow and an excess amount of assets having unrestricted transferability
• An asset received under a re-hypothecation right where the owner has a right to withdraw the asset anytime during the liquidity horizon without remuneration
• Assets held not to cover operational costs

  Note:

  ‘Available-for-Sale Security’ is a security that is purchased with the intent of selling it before its maturity or selling it within a short time period if the security does not have a known maturity. ‘Held-to-Maturity Securities’ are securities that a bank intends to hold until maturity.

All assets, whether owned by the bank or received from counterparties as collateral, are classified as follows:

• Level 1 Assets
• Level 2A Assets
• Level 2B Assets
• Other Assets

Level 1, 2A and 2B assets are considered high quality liquid assets and are included as part of the stock of HQLA provided they meet the HQLA eligibility criteria set out by the US Federal Reserve detailed above. Assets are classified as HQLA based on the qualifying criteria set by the US Federal Reserve. The steps involved in identifying the asset level are as follows: