4.3.1.1 Identifying and Treating Level 1 Assets

The application identifies the following assets as HQLA Level 1 assets:

1. Cash which includes coins, banknotes, and restricted cash. The value included in the stock of HQLA is the cash balance Central bank reserves, to the extent that the central bank policies allow them to be drawn down in times of stress. These include bank’s overnight deposits and term deposits that can be withdrawn immediately Central bank reserves, include the balance held by a bank with the central bank directly, or through a correspondent bank less any minimum reserve requirement. The value of eligible term deposits that are included in the amount net of any withdrawal penalty.
2. Assets issued or guaranteed by one of the following:
   • European Central Bank
   • The Central Bank of a Member State
   • The Central Government of a Member State
3. Assets which satisfy the following conditions:
   • Issuer type or guarantor type is one of the following:
     • Central Bank
     • Central Government
   • The party, that is issuer or guarantor, belongs to a third country.
   • The party is assigned a minimum of a credit quality step 1 credit assignment.
4. Issuer type or guarantor type is one of the Assets which satisfy the following conditions:
   • Regional Government
   • Local Authority
   • Public Sector Entity

   The exposure to the party is treated similarly to the exposure to its respective central government, whether belonging to a Member State or a third country.

5. Assets which satisfy the following conditions:
   • Issuer type or guarantor type is one of the following:
     • Central Bank
     • Central Government
   • The party, that is issuer or guarantor, belongs to a third country.
   • The party is not assigned a credit quality step 1 credit assessment.

   Such assets are included in the stock of HQLA only up to the extent of the bank’s net stressed cash outflows in that currency arising from the bank’s operations in that foreign jurisdiction.

6. Assets which satisfy the following conditions:
   • Issuer type or guarantor type is one of the following:
     • International Organization
     • Multilateral Development Bank
   • The party is assigned a credit quality step 1 credit assessment.
7. Assets issued by credit institutions which satisfy the following criteria:
   • The institution is backed by a Member State central government, regional government or local authority.
   • The exposure to the regional government or local authority is treated similarly to the exposure to its respective central government.
   • The backing authority is obligated to ensure the financial viability of the institution.
8. Assets issued by credit institutions which satisfy the following criteria:
   • The institution is a promotional lender.
   • 90% of its loan is guaranteed a Member State central government, regional government or local authority.
   • The exposure to the regional government or local authority is treated similarly to the exposure to its respective central government.
9. Covered bonds which satisfy the following criteria:
   • Are subject to special supervision which protects bondholders and whose proceeds are invested in a manner that enables the issuer to pay claims on the bonds when they arise.
   • Have an issue size of at least EUR 500 million.
   • Are assigned a minimum of credit quality step 1 credit assessment or a risk weight of <=10%.
   • Not more than 15% of the outstanding issue of covered bond is collateralized by assets issued by institutions assigned a credit quality Step 1.
   • The institution and issuer meet the transparency requirements which accord preferential treatment to covered bonds.
   • The underlying asset pool is more than 2% of the outstanding amount of the covered bond.
10. Sight deposits of the credit institution, which belongs to an institutional protection scheme or a cooperative network, maintained with the central institution of the network, where the central credit institution is legally required to invest the deposit amount in liquid assets of a specified level. The amount included in the stock of Level 1 assets is that portion of the deposit which is invested in Level 1 assets.
11. Assets issued by credit institutions which satisfy the following conditions:
    • Guarantor type is one of the following:
      • Central Government
      • Regional Government
      • Local Authority
    • The guarantor belongs to a Member State.
    • The exposure to the guarantor is treated similarly to the exposure to its respective central government.
    • The guarantee was given before 30 June 2014.
    • The guarantee is direct, explicit, irrevocable, and unconditional and covers the failure to pay principal and interest when due.

    The amount included in the stock of HQLA is only to the extent guaranteed before 30 June 2014.

12. Senior bonds issued by member state-sponsored impaired assets management agencies of the following countries:
    • Ireland
    • Spain
    • Slovenia

    Such bonds are included in the stock of HQLA only till 31 December 2023.

13. Investments in Collective Investment Units (CIUs) which satisfy the following criteria:
    • The following information relating to the CIU is published:
      • The categories of assets in which the CIU is authorized to invest.
      • If investment limits apply, the relative limits and the methodologies to calculate them.
      • The business of the CIU on an annual basis.
    • The underlying assets of the CIU are liquid assets which are classified as Level 1 assets. This is classified by the application.
      • Should not be self-issued.
      • The issuer is subject to special supervision and it ensures sufficient cooperation with the competent authority.

      Note:

      The maximum value of the investment in CIUs by a particular entity included in the stock of HQLA is EUR 500 million across all CIUs held by the entity.

      The application assigns and applies a 0% haircut to all assets classified as Level 1 except covered bonds and CIU’s. Covered bonds classified as Level 1 assets are assigned a haircut of 7%.

      CIUs classified as Level 1 assets, are assigned haircuts as follows:

    • 0% on coins, banknotes, and exposures to central banks.
    • 12% on covered bonds.
    • 5% on other levels 1 assets.