1. User Guide
  2. Liquidity Coverage Ratio Calculation
  3. Regulation YY Liquidity Risk Calculation
  4. Process Flow
  5. Identification of Eligible Buffer Assets

4.6.1.2 Identification of Eligible Buffer Assets

The following assets can be classified as liquidity buffer assets as per Regulation YY provided they are liquid and readily marketable:
  1. Cash
  2. Securities issued or guaranteed by US government, US government agency or US government sponsored enterprise
  3. Any asset classified as HQLA under the US LCR, provided the bank demonstrates to the regulator that it merits inclusion

The application re-uses the US LCR HQLA classification rules for determining eligible buffer assets refer sections Identification and Treatment of Level 1 Assets, Identification and Treatment of Level 2A Assets and Identification and Treatment of Level 2B Assets for details). Cash, in US LCR, is used for determining the value of reserves, while it gets a separate treatment in regulation YY. As per regulation YY, all securities issued by US government, government agencies or GSEs are classified as buffer assets provided they are liquid and readily marketable. In US LCR, there are additional parameters for inclusion of such securities. The application has taken these changes vis-à-vis US LCR into account while re-using the US LCR HQLA classification rules for buffer asset classification.

Additionally, an asset must meet the following criteria to be considered buffer eligible:
  1. Unencumbered, including any asset held as a hedge
  2. Bank has demonstrated the capability to monetize the asset
  3. Must be sufficiently diversified

These criteria are similar to the US LCR criteria that an asset must meet operational requirements and generally applicable HQLA criteria to be included in the stock of HQLA. The application re-uses these rules for identifying liquidity buffer assets that are eligible to be included in the available liquidity buffer.

See section Identifying Eligible HQLA for details on classification of an asset as meeting HQLA operational requirements and generally applicable HQLA criteria.

The application supports this classification for banks own unencumbered assets, mitigants received under re-hypothecation rights, placed collateral and substitutable collateral.