(1) A category 1 institution must, in calculating its total expected cash inflows under section 41(1)(b)—
(a) include only contractual cash inflows (including any accrued interest) that—
(i) are expected to be received within the LCR period; and
(ii) arise from assets (whether on-balance sheet assets or off-balance sheet assets) that are fully performing and in respect of which the institution has no reason to expect a default within the LCR period;
(b) assume that those inflows are received by the institution at the latest possible date based on contractual rights available to its customers; and
(c) not include any cash inflows that are contingent in nature.
(2) A category 1 institution must, for the purposes of section 41(1)(b), calculate its expected cash inflow within the LCR period arising from the following types of asset (whether on-balance sheet or off balance sheet), transaction or activity of the institution—
(a) secured lending transactions (including securities swap transactions);
(b) secured or unsecured loans (other than those that fall within paragraph (a));
(c) release of balances maintained by the institution in segregated accounts in accordance with requirements for protection of customer assets;
(d) maturing securities not included by the institution in its HQLA;
(e) undrawn facilities granted to the institution by another financial institution;
(f) operational deposits placed by the institution at other financial institutions;
(g) derivative contracts; and
(h) other contractual cash inflows arising from assets, transactions or activities not otherwise covered in this subsection.
(3) A category 1 institution must, for the purposes of section 41(1)(b), calculate its total expected cash inflows by multiplying the principal amount of each of its assets (whether on-balance sheet or off-balance sheet) of the types listed in subsection (2) by an inflow rate determined in accordance with subsection (4), using the standard calculation methodology templates specified by the Monetary Authority.
(4) Subject to subsections (5) and (6), the inflow rate (and the manner of its application) for each type of asset listed in subsection (2) must be consistent with, and no less stringent than, the relevant inflow rate (or any other term having a similar denotation) referred to in paragraphs 142 to 160 of the Basel III LCR document.
(5) In the case of contractual cash inflows included in paragraph (h) of subsection (2), where the applicable inflow rate is to be determined by the relevant banking supervisory authority in a jurisdiction and hence is not specified in the Basel III LCR document, a category 1 institution must apply the inflow rates specified in Table 4 to those cash inflows.
Table 4
Inflow rates for calculation of expected cash inflow applicable to other contractual cash inflows included in paragraph (h) of subsection (2)
Type of other contractual cash inflow Inflow rate Other contractual cash inflow to be received from—
(a) the Monetary Authority for the account of the Exchange Fund, central banks and financial institutions
100%
(b) retail customers or small business customers 50%
(c) sovereigns, public sector entities, multilateral development banks, wholesale customers (excluding small business customers), or any other persons not falling within paragraph (a) or (b)
50%
(6) A category 1 institution must have in place and maintain—
(a) adequate policies and limits to ensure that its liquidity position is not unduly reliant on the receipt of expected cash inflows from a limited number of wholesale customers; and
(b) adequate policies and systems for managing assets received as collateral from its counterparties under secured lending transactions so that it is able to fulfil any contractual obligation under those transactions to return one or more of those assets to the counterparty concerned whenever the counterparty decides not to renew the secured lending transaction concerned upon its maturity.
Part 8
Calculation of LMR Division 1—General
44. Interpretation—Part 8 In this Part—
average LMR ( ), in relation to a category 2 institution, means the average of the institution’s LMR in a calendar month, as determined in accordance with section 49;
eligible loan repayment ( ), in relation to the calculation by a category 2 institution of its LMR, means a repayment—
(a) to the institution by a customer (other than a bank) in respect of a loan—
(i) that the institution is not committed to continue, by renewal or otherwise; and (ii) that is fully performing;
(b) the date of which is fixed;
(c) that will fall due within one month;
(d) in respect of which the institution has no reason to expect a default; and
(e) if the loan referred to in paragraph (a) is secured by a pledged deposit referred to in section 54(1)—
(i) in the case where the loan will be fully repaid after receiving that repayment, consisting only of that part of the repayment that exceeds the aggregate of the deposit and interest payable on the deposit;
(ii) in the case where the loan will not be so fully repaid, consisting only of that repayment in so far as it is not made by a corresponding reduction of the amount of the deposit or interest payable on the deposit, or both (but excluding any repayment in respect of mortgage loans referred to in item no.
7 of Table A1 in Schedule 5);
fully performing ( ), in relation to a loan extended by a category 2 institution and the definition of eligible loan repayment, means that—
(a) if the loan is repayable by periodic instalments at intervals of not more than one month, there is no instalment that is in arrears for more than one month on the working day when the LMR is calculated;
(b) in any other case, there are no arrears of principal or interest payment in respect of the loan; and
(c) the loan (relevant loan) is not a loan that has been raised to repay another loan granted to the same customer by the institution; or in respect of which the repayment date or dates has or have been postponed, unless—
(i) the raising of the relevant loan or the postponement of the repayment date or dates, as the case may be, was not caused by a deterioration in the financial position of the customer or by his inability to repay on the original repayment date or dates; and
(ii) the new or revised repayment terms are not unfavourable to the institution as compared to the terms of other loans, of a similar nature to that of the relevant loan, granted by the institution to other customers and negotiated at arm’s length;
one-month liability ( ), in relation to a category 2 institution or bank, means—
(a) any liability, other than a contingent liability, the effect of which will or could be to reduce within one month the liquefiable assets of that institution or bank; and (b) any contingent liability that, in the opinion of the Monetary Authority, may result
in a reduction within one month of the liquefiable assets of that institution or bank;
qualifying ECAI rating ( ), in relation to a marketable debt security or prescribed instrument, means—
(a) a qualifying ECAI issue specific rating assigned to the debt security or instrument;
or
(b) a qualifying ECAI issuer rating assigned to the issuer or the guarantor of the debt security or instrument;
qualifying ECAI issuer rating ( ), in relation to a marketable debt security or prescribed instrument, means—
(a) subject to paragraph (b), the ECAI issuer rating of the issuer or guarantor that—
(i) if mapped to the scale of credit quality grades in Table A, Table B or Part 1 of Table C (in the case of a long-term ECAI issuer rating) in Schedule 6 to
the Capital Rules would result in the debt security or instrument being assigned a credit quality grade of 1 or 2;
(ii) if mapped to the scale of credit quality grades in Part 1 of Table E (in the case of a short-term ECAI issuer rating) in Schedule 6 to the Capital Rules, would result in the debt security or instrument being assigned a credit quality grade of 1 or 2;
(b) if the debt security or instrument is issued or guaranteed by a corporate incorporated in India, the ECAI issuer rating of the issuer or guarantor that—
(i) if mapped to the scale of credit quality grades in Part 2 of Table C (in the case of a long-term ECAI issuer rating) in Schedule 6 to the Capital Rules, would result in the debt security or instrument being assigned a credit quality grade of 1, 2 or 3;
(ii) if mapped to the scale of credit quality grades in Part 2 of Table E (in the case of a short-term ECAI issuer rating) in Schedule 6 to the Capital Rules, would result in the debt security or instrument being assigned a credit quality grade of 1, 2 or 3;
qualifying ECAI issue specific rating ( ), in relation to a marketable debt security or prescribed instrument, means—
(a) subject to paragraph (b), the ECAI issue specific rating of the debt security or instrument that—
(i) if mapped to the scale of credit quality grades in Table A, Table B or Part 1 of Table C (in the case of a long-term ECAI issue specific rating) in Schedule 6 to the Capital Rules would result in the debt security or instrument being assigned a credit quality grade of 1 or 2;
(ii) if mapped to the scale of credit quality grades in Part 1 of Table E (in the case of a short-term ECAI issue specific rating) in Schedule 6 to the Capital Rules, would result in the debt security or instrument being assigned a credit quality grade of 1 or 2;
(b) if the debt security or instrument is issued by a corporate incorporated in India, the ECAI issue specific rating of the debt security or instrument that—
(i) if mapped to the scale of credit quality grades in Part 2 of Table C (in the case of a long-term ECAI issue specific rating) in Schedule 6 to the Capital Rules, would result in the debt security or instrument being assigned a credit quality grade of 1, 2 or 3;
(ii) if mapped to the scale of credit quality grades in Part 2 of Table E (in the case of a short-term ECAI issue specific rating) in Schedule 6 to the Capital Rules, would result in the debt security or instrument being assigned a credit quality grade of 1, 2 or 3.