a.Cash Inflows – 100% in the normal course of business inflows with a cap of 75% of outflows
b.When considering its cash inflows, an IB must include only contractual inflows from outstanding exposures that are fully performing and for which the IB has no reason to expect a default within the 30-day time horizon. Contingent inflows (such as returns on profit-sharing instruments) are not included in total net cash inflows. IB need to monitor the concentration of expected inflows across wholesale counterparties. In order to prevent IB from placing too much reliance on expected inflows to meet their liquidity requirement, and to ensure a minimum level of HQLA holdings, the amount of inflows that can offset outflows is capped at 75% of total expected cash outflows as defined in this standard.
c.The first category of cash inflows is secured financing, including Shari’ah-compliant alternatives to reverse repos and securities borrowing. Unless stated otherwise, the run-off rates mentioned in the following can be applied.
d.IB must assume that the maturity of financing secured by Level 1 assets will be rolled over and will not give rise to any cash inflows. Therefore, an inflow factor of 0% will be applied to this kind of transaction. Maturing financing secured by Level 2 assets will lead to cash inflows equivalent to the relevant haircut for the specific assets. For instance, a 15% inflow factor is assigned if the transaction is secured by Level 2A assets; and an inflow factor of 25–50% is assigned if it is secured by Level 2B assets. IB is assumed not to roll over maturing secured financing covered by non-HQLA assets, and can assume that it will receive back 100% of the cash related to those agreements (i.e. an inflow factor of 100%).
e.The second category of IB cash inflows is committed facilities. No financing facilities, liquidity facilities or other contingent funding facilities that the IB holds at other institutions for its own purposes will be assumed to be drawn. Such facilities receive a 0% inflow rate, meaning that this scenario does not consider inflows from committed financing or liquidity facilities.
f.The third category of cash inflows is inflows from various counterparties, for which the inflow rate is determined by the type of counterparty. This category of inflows takes into account cash inflows from either secured or unsecured transactions from various counterparties, which are categorised as: (a) retail customers and small business customers and (b) wholesale inflows, including non-financial corporates, as well as financial institutions/IBs and other entities. The inflow rate will be determined based on the type of counterparty. Non-financial wholesale counterparties, as well as retail customers, may be assigned a 50% inflow factor, while financial institutions/IBs and central bank counterparties may be assigned a 100% inflow factor.
g.Inflows from financing that have no specific maturity (i.e. have undefined or open maturity) must not be included. Therefore, no assumptions must be applied as to when maturity of such financing would occur. An exception to this would be minimum payments of principal, fee or profit associated with an open maturity financing, provided that such payments are contractually due within 30 days. These minimum payment amounts must be captured as inflows, at the rates prescribed in (d), to these transactions.
h.Inflows from securities maturing within 30 days that are not included in the stock of HQLA must be placed in the same category as inflows from financial institutions (i.e. 100% inflow). IBs may also recognise in this category inflows from the release of balances held in segregated accounts in accordance with regulatory requirements for the protection of customer trading assets, provided that these segregated balances are maintained in HQLA. These inflows must be calculated in line with the treatment of other related outflows and inflows covered in this standard. Level 1 and Level 2 securities maturing within 30 days must be included in the stock of HQLA rather than being counted as inflows, provided that they meet all operational and definitional requirements.
i.Deposits held at other IBs for operational purposes which fall under the category of operational accounts are assumed to stay at the counterparties. Thus, no inflows can be counted for these funds (0% inflow rate). The same treatment applies for deposits held at the centralised institution in a cooperative banking network, as such funds are assumed to stay at the centralised institution.
j.The last category is other cash inflows – that is, inflows that are not categorised under the above categories. This category includes Shari’ah-compliant hedging to which an inflow rate of 100% is assigned. Cash inflows related to non-financial revenues, however, are not taken into account in the calculation of the net cash outflows for the purposes of the LCR.