7.4.1 Regulation Addressed through Business Assumptions
The application supports multiple assumptions with pre-configured rules and scenarios based on regulator specified NSFR scenario parameters. The list of pre-configured business assumptions and the corresponding reference to the regulatory requirement that it addresses is provided in the following tables:
Table 6-2 Regulation Addressed through Business Assumptions
Sl. No. | Assumption Name | Assumption Description | Regulatory Requirement Addressed | Regulatory Reference: Federal Reserve-12 CFR Part 249 |
---|---|---|---|---|
1 | [Fed]-Regulatory Capital Elements | Common Equity Tier 1, Additional Tier 1 and Tier 2 capital prior to the application of capital adjustments or deductions. | This assumption specifies factors for Tier 1 and Tier 2 capital, before the application of capital deductions and excluding the proportion of Tier 2 instruments with residual maturity of less than one year. | Paragraph II-C-3(a) and K.104 |
2 | [Fed]-Stable Retail Deposits | Stable Retail deposits held directly at a covered company. | This set of assumptions specifies factors for Retail Deposits based on whether it is brokered or not and if brokered-based on the type of brokered deposit such as Reciprocal, sweep and other deposits |
Paragraph II-C-3(b, c, and d) and K.104 |
3 | [Fed]-Less Stable Retail Deposits | Less Stable Retail deposits held directly at a covered company. | ||
4 | [Fed]-Reciprocal brokered deposits | Fully insured and uninsured Reciprocal Brokered Deposits | ||
5 | [Fed]-Brokered Sweep Deposits | All types of Brokered sweep deposits including insured and uninsured accounts, affiliated and unaffiliated broker accounts | ||
6 | [Fed]-Other Brokered Deposits | Brokered deposits which are neither reciprocal nor sweep deposits. | ||
7 | [Fed]-Retail non deposit funding | Retail Funding which are not in the form of deposits. | This assumption specifies the factors for all funding other than deposits from Retail customers. |
Paragraph II-C-3(e.) and K.104 |
8 | [Fed]-Non operational balances from non financial customers | Non operational funding received from wholesale customers who are not financial entities or consolidated entities of a financial entity and which matures within 6 months | This set of assumptions specifies the factors for deposits from wholesale customers on the basis of operational deposit, type of wholesale counterparty and secured/unsecured status. |
Paragraph II-C-3(d) and K.104 |
9 | [Fed]-Non operational CF from non financial customers | Non operational funding received from wholesale customers who are not financial entities or consolidated entities of a financial entity and which matures beyond 6 months | ||
10 | [Fed]-Operational balances from wholesale customers | Operational funding received from all types of wholesale customers and which matures within 6 months | ||
11 | [Fed]-Operational CF from wholesale customers | Operational funding received from all types of wholesale customers and which matures beyond 6 months | ||
12 | [Fed]-Non operational balances from financial customers | Non operational funding received from wholesale customers who are either financial entities or consolidated entities of a financial entity and which matures within 6 months | ||
13 | [Fed]-Non operational CF from financial customers | Non operational funding received from wholesale customers who are either financial entities or consolidated entities of a financial entity and which matures beyond 6 months | ||
14 | [Fed]-Secured deposits and other funding from wholesale customers | Secured funding received from wholesale customers and which matures within 6 months | ||
15 | [Fed]-Secured deposits and other funding from wholesale customers-CF | Secured funding received from wholesale customers and which matures beyond 6 months | ||
16 | [Fed]-Long term liabilities | Deposits and Borrowings with a remaining term to maturity of greater than 1 year as prescribed in the US NSFR guidelines. | This assumption specifies the factor for long term funding from wholesale customers. (Maturity beyond one year) | Paragraph II-C-3(a) and K.104 |
17 | [Fed]-Issued Securities | Securities issued by the covered company. | This assumption specifies the factor for securities issued by the covered company. |
Paragraph II-C-3(a, d and e.) and K.104 |
18 | [Fed]-Trade date payables | Trade date payables that result from purchases by a covered company of financial instruments, foreign currencies, and commodities. | This assumption specifies factor for trade date payables. |
Paragraph II-C-3( e.) and K.104 |
19 | [Fed]-Deferred Tax liabilities | Deferred Tax Liabilities | This assumption specifies factor for deferred tax liabilities. | |
20 | [Fed]-Cash and cash items in process of collection | Coins, banknotes, cash, restricted cash and cash items in process of collection, such as bank drafts and cheques. | This assumption specifies factor for Coins, banknotes, cash and restricted cash held by the bank. |
Paragraph II-D-3(a) (i) and K.106 (1) |
21 | [Fed]-Central bank reserves | All central bank reserves, including, required reserves and excess reserves. | This assumption specifies factor for central bank reserves | |
22 | [Fed]-Trade date receivables | Trade date receivables that result from sale of financial instruments, foreign currencies, and commodities. | This assumption specifies factor for trade date receivables. |
Paragraph II-D-3(a) (i) and K.106 (1) |
23 | [Fed]-Claims on central banks | Unencumbered loans and other claims on central banks | This set of assumptions specifies factors for claims on Central banks |
Paragraph II-D-3(a) (i) and K.106 (1) (iii) and (iv) |
24 | [Fed]-Encumbered claims on central banks | Encumbered loans and other claims on central banks | ||
25 | [Fed]-Unencumbered level 1 assets | Unencumbered assets which qualify for inclusion in Level 1 of High quality liquid assets as defined in the LCR. | This set of assumptions specifies factors for unencumbered and encumbered high quality liquid assets |
Paragraph II-D-3(a) (ii),(iv) and (v) and K.106(2),(4) and (5) |
26 | [Fed]-Unencumbered level 2A and 2B assets | Unencumbered assets which qualify for inclusion in Level 2A and 2B of High quality liquid assets as defined in the LCR. | ||
27 | [Fed]-Encumbered level 1 assets | Encumbered portion of assets which qualify for inclusion in Level 1 of High quality liquid assets as defined in the LCR. | ||
28 | [Fed]- Encumbered level 2 assets | Encumbered portion of assets which qualify for inclusion in Level 2A and 2B of High quality liquid assets as defined in the LCR. | ||
29 | [Fed]-Loans to FI secured by level 1 asset | Unencumbered loans to financial institutions where the loan is secured against Level 1 assets as defined in the LCR. | This set of assumptions specifies factors for loans to financial parties on the basis of encumbrance and maturity. |
Paragraph II-D-3(a) (vi), (vii) and K.106(6) and (7) |
30 | [Fed]-Encumbered loans to FI secured by level 1 asset | Encumbered loans to financial institutions where the loan is secured against Level 1 assets as defined in the LCR. | ||
31 | [Fed]-Loans to FI secured by other assets | Unencumbered loans to financial institutions where the loan is secured against assets belonging to levels other than level 1, as defined in the LCR. | ||
32 | [Fed]- Encumbered loans to FI secured by other assets | Encumbered loans to financial institutions where the loan is secured against assets belonging to levels other than level 1, as defined in the LCR. | ||
33 | [Fed]-Unsecured loans to financial instituitions | Unencumbered unsecured loans to financial institutions. | ||
34 | [Fed]- Encumbered unsecured loans to FI | Encumbered unsecured loans to financial institutions. | ||
35 | [Fed]-Loans to other parties maturing in 1year | Unencumbered loans with residual maturity less than a year to other counterparties i.e. Non financial corporates, retail and small business customers, sovereigns, Public sector enterprises and sovereigns. | This set of assumptions specifies factors for loans to non financial parties on the basis of encumbrance and maturity. |
Paragraph II-D-3(a) (vi), (vii) and K.106(6) and (7) |
36 | [Fed]-Encumbered loans to other parties maturing in 1year | Encumbered loans with residual maturity less than a year to other counterparties i.e. Non financial corporates, retail and small business customers, sovereigns, Public sector enterprises and sovereigns. | ||
37 | [Fed]-Loans to other parties maturing beyond 1year | Unencumbered loans with residual maturity beyond one year to other counterparties i.e. Non financial corporates, retail and small business customers, sovereigns, Public sector enterprises and sovereigns. | ||
38 | [Fed]-Encumbered loans to others maturing beyond 1year | Encumbered loans with residual maturity more than a year to other counterparties i.e. Non financial corporates, retail and small business customers, sovereigns, Public sector enterprises and sovereigns. | ||
39 | [Fed]-Unencumbered residential mortgage loans | Unencumbered residential mortgage loans which would qualify for a) 50% or lesser risk weight as per U.S. Capital Rules b) higher than 50% risk weight as per U.S. Capital Rules | This set of assumptions specifies factors for residential mortgage loans on the basis of their risk weight. |
Paragraph II-D-3(a) (vi),(vii) and K.106(6),(7) |
40 | [Fed]-Encumbered residential mortgage loans | Encumbered residential mortgage loans which would qualify for a) 50% or lesser risk weight as per U.S. Capital Rules b) higher than 50% risk weight as per U.S. Capital Rules | ||
41 | [Fed]-Operational balances with other banks | Operational portion of encumbered deposits held at other financial institutions, for operational purposes. | This set of assumptions specifies the factors for deposits held at other covered institutions. |
Paragraph II-D-3(a) (v) and K.106(5 |
42 | [Fed]-Non operational balances with other banks | Non operational portion of operational deposits held at other financial institutions. | ||
43 | [Fed]- Encumbered balances with other banks | Encumbered deposits held by the covered company at other financial institutions. | ||
44 | [Fed]-Non HQLA assets | Unencumbered securities which do not qualify as High Quality Liquid Assets(HQLA) under the LCR Rule | This set of assumptions specifies factors for unencumbered and encumbered assets which are not HQLA. |
Paragraph II-D-3(a) (v) (vii) and K.106(5),(7) |
45 | [Fed]-Encumbered non HQLA assets | Encumbered securities which do not qualify as High Quality Liquid Assets(HQLA) under the LCR Rule | ||
46 | [Fed]- Derivative liabilities | Potential valuation changes for derivative liabilities | This set of assumptions specifies factors for Derivatives. | Paragraph 107(5) |
47 | [Fed]- NSFR Derivative liabilities | NSFR derivative liabilities, with consideration of variation margin posted. | Paragraph 107(c and d) | |
48 | [Fed]- NSFR Derivative assets | NSFR derivative assets along with consideration of variation margin received as cash. | ||
49 | [Fed]-Credit and liquidity facilities extended to customers | Off balance sheet exposures- Irrevocable and conditionally revocable credit and liquidity facilities offered to clients by the bank | This assumption specifies factors for credit and liquidity facilities extended to customers. |
Paragraph II-D-3(a) (ii) and K.106 (1) |
50 | [Fed]-Initial margin for derivatives | Initial margin provided by the covered company and the covered company's contributions to central counterparty (CCP) mutualized loss sharing arrangements. | This set of assumptions treat initial and variation margin placed and received against derivatives. | Paragraph 107(b-6) |
51 | [Fed]-Variation margin received | Variation margin received by the covered company whose RSF treatment is in accordance to the type of collateral received. | Paragraph 107(b)(4) | |
52 | [Fed]-Commodities | Unencumbered commodities held by the covered company. | This set of assumptions specifies factors for commodities on the basis of encumbrance. |
Paragraph II-D-3(a) (vii) and K.106(7) |
53 | [Fed]-Encumbered commodities | Encumbered commodities held by the covered company. |