Prudential Regulation Authority Rulebook

1.

Institutions shall report their liquidity inflows. Capped liquidity inflows shall be the liquidity inflows limited to 75% of liquidity outflows. Institutions may exempt liquidity inflows from deposits placed with other institutions and qualifying for the treatments set out in Article 113(6) from this limit. Institutions may exempt liquidity inflows from monies due from borrowers and bond investors related to mortgage lending funded by bonds eligible for the treatment set out in Article 129(4), (5) or (6) or by CRR covered bonds from this limit. Institutions may exempt inflows from promotional loans that the institutions have passed through. An institution may apply to the competent authority for permission fully or partially to exempt inflows where the provider is a parent or a subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a common management relationship.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

2.

The liquidity inflows shall be measured over the next 30 days. They shall comprise only contractual inflows from exposures that are not past due and for which the institution has no reason to expect non-performance within the 30-day time horizon. Liquidity inflows shall be reported in full with the following inflows reported separately:

1. (a) monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50% of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph.
   By way of derogation from the first subparagraph of this point, institutions that have received a commitment referred to in Article 424(6) in order for them to disburse a promotional loan to a final recipient may take an inflow into account up to the amount of the outflow they apply to the corresponding commitment to extend those promotional loans;
2. (b) monies due from trade financing transactions referred to in point (b) of the second subparagraph of Article 162(3) with a residual maturity of up to 30 days, shall be taken into account in full as inflows;
3. (c) loans with an undefined contractual end date shall be taken into account with a 20% inflow, provided that the contract allows the institution to withdraw and request payment within 30 days;
4. (d) monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 if they are collateralised by liquid assets as referred to in Article 416(1), shall not be taken into account up to the value net of haircuts of the liquid assets and shall be taken into account in full for the remaining monies due;
5. (e) monies due that the institution owing those monies treats in accordance with Article 422(3) and (4), shall be multiplied by a corresponding symmetrical inflow;
6. (f) monies due from positions in major index equity instruments provided that there is no double counting with liquid assets;
7. (g) any undrawn credit or liquidity facilities and any other commitments received shall not be taken into account.

3.

Outflows and inflows expected over the 30-day horizon from the contracts listed in Annex II of the CRR shall be reflected on a net basis across counterparties and shall be multiplied by 100% in the event of a net inflow. Net basis shall mean also net of collateral to be received that qualifies as liquid assets under Article 416.

4.

By way of derogation from point (g) of paragraph 2, an institution may apply to the competent authority for permission to apply a higher inflow on a case-by-case basis for credit and liquidity facilities with a counterparty who:

1. (a) is a UK parent institution or subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a common management relationship;
2. (b) applies a corresponding symmetric or more conservative outflow by way of derogation from Articles 422, 423 and 424; and
3. (c) is established in the United Kingdom.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

7.

Institutions shall not report inflows from any of the liquid assets reported in accordance with Article 416 other than payments due on the assets that are not reflected in the market value of the asset.

8.

Institutions shall not report inflows from any new obligations entered into.

9.

Institutions shall take liquidity inflows which are to be received in third countries where there are transfer restrictions or which are denominated in non-convertible currencies into account only to the extent that they correspond to outflows respectively in the third country or currency in question.

[Note: This rule corresponds to Article 425 of the CRR as it applied immediately before revocation by the Treasury.]