(a) Operational
requirements for eligible HQLA. With respect to each asset that
is eligible for inclusion in a Board-regulated institution’s HQLA
amount, a Board-regulated institution must meet all of the following
operational requirements:
(1) The Board-regulated institution must demonstrate the operational
capability to monetize the HQLA by:
(i) Implementing and maintaining appropriate
procedures and systems to monetize any HQLA at any time in accordance
with relevant standard settlement periods and procedures; and
(ii) Periodically monetizing a sample
of HQLA that reasonably reflects the composition of the Board-regulated
institution’s eligible HQLA, including with respect to asset type,
maturity, and counterparty characteristics;
(2) The Board-regulated institution must
implement policies that require eligible HQLA to be under the control
of the management function in the Board-regulated institution
that is charged with managing liquidity risk, and this management
function must evidence its control over the HQLA by either:
(i) Segregating the HQLA from other
assets, with the sole intent to use the HQLA as a source of liquidity;
or
(ii) Demonstrating the ability
to monetize the assets and making the proceeds available to the liquidity
management function without conflicting with a business or risk management
strategy of the Board-regulated institution;
(3) The fair value of the eligible HQLA
must be reduced by the outflow amount that would result from the termination
of any specific transaction hedging eligible HQLA;
(4) The Board-regulated institution must
implement and maintain policies and procedures that determine the
composition of its eligible HQLA on each calculation date, by:
(i) Identifying its
eligible HQLA by legal entity, geographical location, currency, account,
or other relevant identifying factors as of the calculation date;
(ii) Determining that eligible
HQLA meet the criteria set forth in this section; and
(iii) Ensuring the appropriate diversification
of the eligible HQLA by asset type, counterparty, issuer, currency,
borrowing capacity, or other factors associated with the liquidity
risk of the assets; and
(5) The Board-regulated institution must have a documented methodology
that results in a consistent treatment for determining that the Board-regulated
institution’s eligible HQLA meet the requirements set forth in this
section.
(b) Generally
applicable criteria for eligible HQLA. A Board-regulated institution’s
eligible HQLA must meet all of the following criteria:
(1) The assets are not encumbered.
(2) The asset is not:
(i) A client pool security held
in a segregated account; or
(ii)
An asset received from a secured funding transaction involving client
pool securities that were held in a segregated account;
(3) For eligible HQLA held in a legal
entity that is a U.S. consolidated subsidiary of a Board-regulated
institution:
(i)
If the U.S. consolidated subsidiary is subject to a minimum liquidity
standard under this part, 12 CFR part 50, or 12 CFR part 329, the
Board-regulated institution may include the eligible HQLA of the U.S.
consolidated subsidiary in its HQLA amount up to:
(A) The amount of net cash outflows of
the U.S. consolidated subsidiary calculated by the U.S. consolidated
subsidiary for its own minimum liquidity standard under this part,
12 CFR part 50, or 12 CFR part 329; plus
(B) Any additional amount of assets, including
proceeds from the monetization of assets, that would be available
for transfer to the top-tier Board-regulated institution during times
of stress without statutory, regulatory, contractual, or supervisory
restrictions, including sections 23A and 23B of the Federal Reserve
Act (12 U.S.C. 371c and 12 U.S.C. 371c-1) and Regulation W (12 CFR
part 223);
(ii)
If the U.S. consolidated subsidiary is not subject to a minimum liquidity
standard under this part, or 12 CFR part 50, or 12 CFR part 329, the
Board-regulated institution may include the eligible HQLA of the U.S.
consolidated subsidiary in its HQLA amount up to:
(A) The amount of the net cash outflows
of the U.S. consolidated subsidiary as of the 30th calendar day after
the calculation date, as calculated by the Board-regulated institution
for the Board-regulated institution’s minimum liquidity standard under
this part; plus
(B) Any additional
amount of assets, including proceeds from the monetization of assets,
that would be available for transfer to the top-tier Board-regulated
institution during times of stress without statutory, regulatory,
contractual, or supervisory restrictions, including sections 23A and
23B of the Federal Reserve Act (12 U.S.C. 371c and 12 U.S.C. 371c-1)
and Regulation W (12 CFR part 223); and
(4) For HQLA held by a consolidated
subsidiary of the Board-regulated institution that is organized under the laws
of a foreign jurisdiction, the Board-regulated institution may include
the eligible HQLA of the consolidated subsidiary organized under the
laws of a foreign jurisdiction in its HQLA amount up to:
(i) The amount of net cash outflows
of the consolidated subsidiary as of the 30th calendar day after the
calculation date, as calculated by the Board-regulated institution
for the Board-regulated institution’s minimum liquidity standard under
this part; plus
(ii) Any
additional amount of assets that are available for transfer to the
top-tier Board-regulated institution during times of stress without
statutory, regulatory, contractual, or supervisory restrictions;
(5) The Board-regulated
institution must not include as eligible HQLA any assets, or HQLA
resulting from transactions involving an asset that the Board-regulated
institution received with rehypothecation rights, if the counterparty
that provided the asset or the beneficial owner of the asset has a
contractual right to withdraw the assets without an obligation to
pay more than de minimis remuneration at any time during the 30 calendar
days following the calculation date; and
(6) The Board-regulated institution has
not designated the assets to cover operational costs.
(c) Maintenance of U.S. eligible HQLA. A Board-regulated institution is generally expected to maintain
as eligible HQLA an amount and type of eligible HQLA in the United
States that is sufficient to meet its total net cash outflow amount
in the United States under subpart D of this part.
