4.2.2.1 Operational Requirements
- Operational Capability to Monetize HQLA
An asset can be considered HQLA only if the bank has demonstrated the operational capability to monetize such an asset. The application captures this information for each asset as a flag.
- HQLA Under the Control of the Liquidity Management Function
To be considered eligible HQLA the asset are under the control of the management function of the bank that manages liquidity. The application captures this information for each asset as a flag.
- Termination of Transaction Hedging HQLA
If a HQLA is hedged by a specific transaction, then the application considers the impact of closing out the hedge to liquidate the asset that is, the cost of terminating the hedge while computing the stock of HQLA. The hedge termination cost is deducted from the fair value of the asset and the difference is included in the stock of HQLA.
- Policies and Procedures to Determine Eligible HQLA Composition
The banks that have established policies and procedures determine the composition of their eligible HQLA on a periodic basis. This is a qualitative criteria which banks have to ensure compliance with.