Which bonds are HQLA?

Many other private debt securities qualify as L2 HQLA, including other covered bonds, investment-grade corporate bonds and highly rated asset-backed securities (ABS).

What is liquidity of an asset?

Liquidity describes your ability to exchange an asset for cash. The easier it is to convert an asset into cash, the more liquid it is. And cash is generally considered the most liquid asset.

How is HQLA calculated?

The maximum amount of Level 2B assets in the stock of HQLA is equal to 15/85 of the sum of the adjusted amounts of Level 1 and Level 2A assets, and up to a maximum of one fourth of the adjusted amount of Level 1 assets, both after haircuts have been applied.

What are Level 3 assets?

Level 3 assets are financial assets and liabilities that are considered to be the most illiquid and hardest to value. Examples of Level 3 assets include mortgage-backed securities (MBS), private equity shares, complex derivatives, foreign stocks, and distressed debt.

What is considered HQLA?

High-quality liquid asset (HQLA) means an asset that is a level 1 liquid asset, level 2A liquid asset, or level 2B liquid asset, in accordance with the criteria set forth in § 329.20.

What are high quality liquid assets examples?

Examples of liquid assets

• Cash or currency: The cash you physically have on hand.
• Bank accounts: The money in your checking account or savings account.
• Accounts receivable: The money owed to your business by your customers.
• Mutual funds: A fund that pools money from many different investors into a diverse portfolio.

What are three types of assets?

Different Types of Assets and Liabilities?

• Assets. Mostly assets are classified based on 3 broad categories, namely –
• Current assets or short-term assets.
• Fixed assets or long-term assets.
• Tangible assets.
• Intangible assets.
• Operating assets.
• Non-operating assets.
• Liability.

What are the most liquid assets?

Cash on hand is the most liquid type of asset, followed by funds you can withdraw from your bank accounts.

IS cash considered HQLA?

HQLA are comprised of Level 1 and Level 2 assets. Level 1 assets generally include cash, central bank reserves, and certain marketable securities backed by sovereigns and central banks, among others. Level 2A assets include, for example, certain government securities, covered bonds and corporate debt securities.

How are Level 3 assets?

Level 3 assets are financial assets and liabilities that are considered to be the most illiquid and hardest to value. Their values can only be estimated using a combination of complex market prices, mathematical models, and subjective assumptions.

What does high quality liquid assets ( HQLA ) mean?

High-Quality Liquid Assets (HQLA) is a concept to be situated as part of the “liquidity coverage ratio”, which is part of the Basel III standards for deposit-taking regulated banking institutions. The aim of the requirement is to have sufficient liquidity at all times to meet short-term obligations and deposit withdrawals.

How much is a Level 1 liquid asset?

Level 1 liquid asset amount = Level 1 liquid assets that are eligible HQLA – Reserve balance requirement; Level 2A liquid asset amount = .85 * Level 2A liquid assets that are eligible HQLA;

When is HQLA eligible at Central Banks 2?

HQLA (except Level 2B assets as defined below in LCR30.44 to LCR30.46) should ideally be eligible at central banks 2 for intraday liquidity needs and overnight liquidity facilities. In the past, central banks have provided a further backstop to the supply of banking system liquidity under conditions of severe stress.

What is the definition of HQLA in lcr40?

Under the standard, banks must hold a stock of unencumbered HQLA to cover the total net cash outflows (as defined in LCR40) over a 30-day period under the stress scenario prescribed in LCR20. In order to qualify as HQLA, assets should be liquid in markets during a time of stress and, ideally, be central bank eligible.