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Regulation. Simply!
Banking Timelines
The Buy-Side
The Sell-Side
Thoughts
About Us
The total stock of High Quality Liquid Assets should EXCEED the 30 day outflow projected for the bank. As a formula it looks as shown below:
High Quality Liquid Assets:
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Level 1 assets are the best: require no haircut. $ 100 of asset can be taken as worth $ 100
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Level 2 assets are the next grade: 15% + haircut usually required. $ 100 of asset can be taken as worth $ 85 at best.
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A National Regulator will categorize assets into levels; and specify appropriate haircuts.
Monitoring Tools:
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1. Contractual Maturity Mismatch
2. Concentration of Funding
3. Available Unencumbered Assets
4. LCR by significant currency
5. Market-related monitoring tools
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