Banks Act, 1990 (Act No. 94 of 1990)RegulationsRegulations relating to BanksChapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof26. Liquidity riskDirectives, definitions and interpretations for completion of monthly return concerning liquidity risk (Form BA 300)Subregulation (12) Matters related to the calculation of a bank's liquidity coverage ratio (LCR)Subregulation (12)(f) Formulae for the calculation of LCR |
(f) Formulae for the calculation of LCR
Based on the relevant requirements specified in this subregulation (12), a bank shall calculate its LCR in accordance with the formula specified below:
Provided that:
| (i) | all relevant level one and level two high-quality liquid assets shall be included in the aforesaid formula at their respective market values, after all relevant haircuts have been applied; |
| (ii) | subject to the provisions of sub-paragraph (iii) below, the bank shall manage its business in such a manner that its calculated LCR during the periods specified in table 4 below is at no stage lower than the relevant percentage requirements specified in table 4 below: |
Table 4
Specified period |
Minimum LCR |
1 January 2015 to 31 December 2015 |
60% |
1 January 2016 to 31 December 2016 |
70% |
1 January 2017 to 31 December 2017 |
80% |
1 January 2018 to 31 December 2018 |
90% |
1 January 2019 and thereafter |
100% |
| (iii) | during such a period of financial stress as may be directed in writing by the Registrar— |
| (A) | a bank shall manage its business in such a manner that its calculated LCR is at no stage lower than the relevant percentages specified in writing by the Registrar; |
| (B) | a bank shall in writing present to the Registrar an assessment of its liquidity position, including— |
| (i) | the reasons for or factors that contributed to, or are likely to contribute to, the bank's failure to comply with the minimum required LCR specified in sub-paragraph (ii) above; |
| (ii) | the measures that have been and will be taken by the bank to restore its liquidity positions; and |
| (iii) | the bank's expectations on the potential duration of the stressed liquidity situation or period; |
| (C) | a bank shall in writing submit to the Registrar such reports, returns or further information related to its liquidity position as may be directed in writing by the Registrar; |
| (D) | a bank shall comply with such measures or requirements as may be directed in writing by the Registar, which may relate to or include matters such as— |
| (i) | a reduction in the bank's exposure to liquidity risk; |
| (ii) | a strengthening of the bank's overall policies, processes and procedures related to liquidity risk management; |
| (iii) | an improvement in the bank's contingency funding plan; |
| (iv) | the bank shall apply to the current market value of each relevant- |
| (A) | level one high-quality liquid asset such a haircut percentage as may be specified in writing by the Registrar; |
| (B) | level two high-quality liquid asset, other than an asset or instrument that forms part of the bank's level 2B portfolio of high-quality liquid asset, a haircut of no less than 15 per cent, or such a higher haircut percentage as may be specified in writing by the Registrar; |
| (C) | asset or instrument that forms part of the bank's level 2B portfolio of high-quality liquid asset, a haircut of no less than the percentages specified in paragraph (b)(iii) above, or such a higher haircut percentage as may be specified in writing by the Registrar; |
| (v) | the bank's total net cash outflows shall be calculated for a period of 30 consecutive calendar days in accordance with the relevant requirements specified in this subregulation (12); |
| (vi) | while the bank is required to calculate and report its relevant LCR in Rand, in order to better manage and understand its potential currency mismatches, the bank shall also monitor its respective LCRs in each significant currency, for which purposes- |
| (A) | a currency shall be deemed to be significant when the aggregate liabilities denominated in that currency amount to two per cent or more of the bank's total liabilities; |
| (B) | all relevant cash flows shall be based on the relevant currency in which the counterparties are obliged to deliver or settle the contract, that is, irrespective of the currency to which a contract may be indexed or linked, or the currency fluctuation that is intended to be hedged by means of the contract, the bank shall calculate the relevant required cash flows based on the relevant currency in which the counterparties are obliged to deliver or settle the contract; |
| (C) | the bank shall calculate the relevant net foreign exchange cash outflow amount net of any relevant foreign exchange hedge contract; |
| (D) | the bank shall continuously evaluate its ability to raise funds in foreign currency markets and to transfer any liquidity surplus from one currency to another and across jurisdictions and legal entities; |
| (E) | the Registrar may specify in writing such threshold levels or monitoring ranges in respect of such foreign currency LCR as the Registrar may deem appropriate from time to time; |
| (F) | the bank shall calculate its LCR in each significant currency through the application of the formula specified below: |
[Regulation 26(12)(f) substituted by regulation (2)(c) of Notice No. R. 309 dated 10 April 2015]