LCR: More G-Secs will qualify for high quality assets

 

MUMBAI: The Reserve Bank of India (RBI) has allowed banks to reckon an additional two per cent of Government Securities (G-Secs) from the SLR basket as Level 1 high quality liquid assets (HQLAs) while computing liquidity coverage ratio (LCR).

The new move will see a total of 13 per cent of G-Secs held by the banks finding berth in HQLAs as against 11 per cent, thus helping the banks achieve their LCR under Basel rules easier than before.

Through a notification yesterday (June 15), RBI said the banks could now reckon G-Secs held by them up to another 2 per cent of their NDTL, under facility to avail liquidity for liquidity coverage ratio (FALLCR) within the mandatory SLR requirement, as Level 1 HQLA for the purpose of computing their LCR.

This will take the maximum permissible presence of FALLCR in Level 1 HQLA to 11 per cent from the earlier 9 per cent, and the total carve-out from SLR available to banks to 13 per cent of their NDTL.

Until the new RBI move, the assets allowed as the Level 1 HQLAs while computing the LCR of banks included  (a) G-Sec in excess of the minimum SLR requirement and, (b) within the mandatory SLR requirement, (i) G-Secs to the extent allowed by RBI under Marginal Standing Facility (MSF) [presently 2 per cent of the bank’s NDTL] and (ii) under FALLCR  [9 per cent of the bank’s NDTL – this has been raised to 11 per cent].

However, for the purpose of LCR, banks need to value such government securities reckoned as HQLA at an amount not greater than their current market value, irrespective of whether they are held to maturity (HTM), available for sale (AFS) or held for trading (HFT).

 

 

 

 

 

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