Committed facilities and contractual obligations

7.1 Committed credit and liquidity facilities (undrawn portion)

7.1.a To retail customers and SBC 5% 131(a)

7.1.b To non-financial corporates, sovereigns, central banks, PSEs and multilateral development banks:

 Credit facilities 10% 131(b)

 Liquidity facilities⁴¹ 30% 131(c)

7.1.c To banks subject to prudential supervision 40% 131(d) 7.1.d To other financial institutions:

 Credit facilities 40% 131(e)

 Liquidity facilities 100% 131(f)

7.1.e To other legal entities 100% 131(g)

7.2 Other contractual lending obligations to financial institutions not captured elsewhere

100% 132

41 As defined in the January 2013 LCR Revision, a “liquidity facility” is an committed, undrawn back-up facility that would be utilised to refinance the debt obligations of a customer in situations where such a customer is unable to rollover that debt in financial markets (e.g. pursuant to a commercial paper programme, secured financing transactions, obligations to redeem liabilities, etc). For the purpose of the LCR, the amount of the commitment to be treated as a liquidity facility is the amount of the currently outstanding debt issued by the customer (or proportionate share in case of a syndicated facility) maturing within a 30-day period that is backstopped by the facility. The portion of a liquidity facility that is backing debt that does not mature within the 30-day period is excluded from the scope of the definition of liquidity facility. Any additional capacity of the facility (i.e. the remaining commitment) would be treated as a committed credit facility. General working capital facilities for corporate entities (e.g. revolving credit facilities in place for general corporate or working capital purposes) will not be classified as liquidity facilities, but as credit facilities.

Schedule B : Cash Outflows (over next 30 days) ^Outflow

7.3 Excess of (a) total other contractual obligations to extend funds to retail and non-financial corporate customers over (b) 50% of the total contractual inflows from these customers

(Note:

This item is aimed to ensure comprehensive treatment of funding obligations granted by AIs to retail and corporate customers. The requirement specified in this item should be understood in conjunction with the treatment of inflows from retail (including SBC) and non-financial corporate

customers.

Under the LCR, inflows from retail and non-financial corporate customers are subject to a 50% inflow rate (see items 2.1 and 2.2.a in the table of Cash Inflows in Schedule C), on the assumption that one half of such inflows would be lent out by banks to these customers as a continuation of financial intermediation. Taking this inflow treatment into account, the BCBS sets the corresponding outflow treatment in such a way that if a bank’s contractual obligations

granted to retail and non-financial corporate customers (not captured in other outflow items) do not exceed 50% of the total amount of inflows from these customers, it will not be necessary for the bank to cater for such funding obligations as this has been addressed on the side of inflow treatment. If these funding obligations exceed 50% of the contractual inflows from these customers, the excess portion should be captured fully with a 100% outflow rate.)

100% 133

8. Other contingent funding obligations 134-140

8.1 Non-contractual contingent funding obligations related to potential liquidity draws by unconsolidated joint ventures or minority investments in entities which rely on the AI as the major liquidity provider

To be agreed

with HKMA

137

8.2 Contingent funding obligations related to trade finance 8.2.a Shipping guarantees

8.2.b Other contingent funding obligations related to trade finance (including documentary trade letters of credit, documentary and clean collection, import and export bills, and other guarantees or undertakings granted by the AI in trade financing transactions)

(Note:

This item is aimed to address the situation where an AI has

2%

5%

138-139

Schedule B : Cash Outflows (over next 30 days) ^Outflow

undertaken various types of contingent obligations in the course of providing trade financing services. Typical examples include the issuance of letters of credit, shipping guarantees or other similar types of trade finance

instruments. Under the LCR, contingent obligations related to trade finance can be subject to a lower range of outflow rate (0-5%), provided that such obligations are underpinned by genuine import or export of goods or services. To avoid doubt, lending commitments, such as direct import or export financing for non-financial corporates, are not included in this item. Such credit facility commitments should be covered under item 7 above.

Having assessed the attributes and transaction behaviour of some major types of trade finance products, the HKMA considers that the likelihood for the contingent funding obligations to crystallise for AIs may vary across different types of trade finance products. For example, the possibility of being called on shipping guarantees is considered to be lower than that of other trade finance products. Therefore, the HKMA’s current proposal is to apply a 5% outflow rate for trade finance contingent obligations, except for shipping guarantees which may receive a 2% outflow rate.)

8.3 Unconditionally revocable “uncommitted” credit and liquidity facilities

0% 140

(1^st bullet)

8.4 Guarantees and letters of credit unrelated to trade finance obligations

10% 140 (2^nd bullet)

8.5 Non-contractual obligations where customer short positions are covered by other customers’ collateral that are not qualified as HQLA

(Note: If an AI has internally used the collateral of a

customer (Customer A) (which is not qualified as HQLA) to cover a short trading position taken by another customer (Customer B), possible withdrawal of collateral (by Customer A) may make it necessary for the AI to incur outflows or to seek additional funding. The HKMA proposes to specify the potential outflow / liquidity need as 50%

(which is the minimum requirement set by the BCBS) of the market value of the customer collateral that is internally used by the AI to cover the trading position of other customers.)

50% 140 (5^th bullet)

Schedule B : Cash Outflows (over next 30 days) ^Outflow rate

Ref. para, in January 2013 LCR Revision

8.6 Other non-contractual obligations 10% 140

(3^rd bullet)

(Note: These obligations may include (a) potential repurchases of securities issued by the AI (or related

conduits, securities investment vehicles); (b) non-contractual obligations to maintain marketability of structured products issued by the AI; (c) managed funds (such as money market mutual funds or other types of stable value collective investment funds) that are marketed by the AI with an objective of maintaining a stable value.)