§ 249.20. High-quality liquid asset criteria.

1,118 words·~5 min read·/us/cfr/t12/s§ 249.20

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(a)Level 1 liquid assets. An asset is a level 1 liquid asset if it is one of the following types of assets:

(1)Reserve Bank balances;

(2)Foreign withdrawable reserves;

(3)A security that is issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, the U.S. Department of the Treasury;

(4)A security that is issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, a U.S. government agency (other than the U.S. Department of the Treasury) whose obligations are fully and explicitly guaranteed by the full faith and credit of the U.S. government, provided that the security is liquid and readily-marketable;

(5)A security that is issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, a sovereign entity, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, European Community, or a multilateral development bank, that is:

(i)Assigned a zero percent risk weight under subpart D of Regulation Q (12 CFR part 217) as of the calculation date;

(ii)Liquid and readily-marketable;

(iii)Issued or guaranteed by an entity whose obligations have a proven record as a reliable source of liquidity in repurchase or sales markets during stressed market conditions; and

(iv)Not an obligation of a financial sector entity and not an obligation of a consolidated subsidiary of a financial sector entity; or

(6)A security issued by, or unconditionally guaranteed as to the timely payment of principal and interest by, a sovereign entity that is not assigned a zero percent risk weight under subpart D of Regulation Q (12 CFR part 217), where the sovereign entity issues the security in its own currency, the security is liquid and readily-marketable, and the Board-regulated institution holds the security in order to meet its net cash outflows in the jurisdiction of the sovereign entity, as calculated under subpart D of this part.

(b)Level 2A liquid assets. An asset is a level 2A liquid asset if the asset is liquid and readily-marketable and is one of the following types of assets:

(1)A security issued by, or guaranteed as to the timely payment of principal and interest by, a U.S. government-sponsored enterprise, that is investment grade under 12 CFR part 1 as of the calculation date, provided that the claim is senior to preferred stock; or

(2)A security that is issued by, or guaranteed as to the timely payment of principal and interest by, a sovereign entity or multilateral development bank that is:

(i)Not included in level 1 liquid assets;

(ii)Assigned no higher than a 20 percent risk weight under subpart D of Regulation Q (12 CFR part 217) as of the calculation date;

(iii)Issued or guaranteed by an entity whose obligations have a proven record as a reliable source of liquidity in repurchase or sales markets during stressed market conditions, as demonstrated by:

(A)The market price of the security or equivalent securities of the issuer declining by no more than 10 percent during a 30 calendar-day period of significant stress, or

(B)The market haircut demanded by counterparties to secured lending and secured funding transactions that are collateralized by the security or equivalent securities of the issuer increasing by no more than 10 percentage points during a 30 calendar-day period of significant stress; and

(iv)Not an obligation of a financial sector entity, and not an obligation of a consolidated subsidiary of a financial sector entity.

(c)Level 2B liquid assets. An asset is a level 2B liquid asset if the asset is liquid and readily-marketable and is one of the following types of assets:

(1)A corporate debt security that is:

(i)Investment grade under 12 CFR part 1 as of the calculation date;

(ii)Issued or guaranteed by an entity whose obligations have a proven record as a reliable source of liquidity in repurchase or sales markets during stressed market conditions, as demonstrated by:

(A)The market price of the corporate debt security or equivalent securities of the issuer declining by no more than 20 percent during a 30 calendar-day period of significant stress, or

(B)The market haircut demanded by counterparties to secured lending and secured funding transactions that are collateralized by the corporate debt security or equivalent securities of the issuer increasing by no more than 20 percentage points during a 30 calendar-day period of significant stress; and

(iii)Not an obligation of a financial sector entity and not an obligation of a consolidated subsidiary of a financial sector entity;

(2)A publicly traded common equity share that is:

(i)Included in:

(A)The Russell 1000 Index; or

(B)An index that a Board-regulated institution's supervisor in a foreign jurisdiction recognizes for purposes of including equity shares in level 2B liquid assets under applicable regulatory policy, if the share is held in that foreign jurisdiction;

(ii)Issued in:

(A)U.S. dollars; or

(B)The currency of a jurisdiction where the Board-regulated institution operates and the Board-regulated institution holds the common equity share in order to cover its net cash outflows in that jurisdiction, as calculated under subpart D of this part;

(iii)Issued by an entity whose publicly traded common equity shares have a proven record as a reliable source of liquidity in repurchase or sales markets during stressed market conditions, as demonstrated by:

(A)The market price of the security or equivalent securities of the issuer declining by no more than 40 percent during a 30 calendar-day period of significant stress, or

(B)The market haircut demanded by counterparties to securities borrowing and lending transactions that are collateralized by the publicly traded common equity shares or equivalent securities of the issuer increasing by no more than 40 percentage points, during a 30 calendar day period of significant stress;

(iv)Not issued by a financial sector entity and not issued by a consolidated subsidiary of a financial sector entity;

(v)If held by a depository institution, is not acquired in satisfaction of a debt previously contracted (DPC); and

(vi)If held by a consolidated subsidiary of a depository institution, the depository institution can include the publicly traded common equity share in its level 2B liquid assets only if the share is held to cover net cash outflows of the depository institution's consolidated subsidiary in which the publicly traded common equity share is held, as calculated by the Board-regulated institution under subpart D of this part; or

(3)A municipal obligation that is investment grade under 12 CFR part 1 as of the calculation date. [79 FR 61523, 61539, Oct. 10, 2014, as amended at 81 FR 21232, Apr. 11, 2016; 83 FR 44455, Aug. 31, 2018]

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§ 249.20

High-quality liquid asset criteria.

Fed. Reg.×32

C.F.R.×6

Cite12 CFR 217

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