BIPRU 12.7 Liquid assets buffer

For the purpose of satisfying BIPRU 12.2.8R, a firm to which this section applies may only include in its liquid assets buffer:

1. (1)

   high quality debt securities issued by a government or central bank;

2. (2)

   securities issued by a designated multilateral development bank;

3. (3)

   reserves in the form of sight deposits with a central bank of the kind specified in BIPRU 12.7.5R and BIPRU 12.7.6R; and

4. (4)

   in the case of a simplified ILAS BIPRU firm only, investments in a designated money market fund.

Subject to BIPRU 12.7.4R, for the purpose of BIPRU 12.7.2R (1), a firm may include a debt security which is:

1. (1)

   issued by the central government or central bank of an EEA State; or

2. (2)

   issued by the central government or central bank of Canada, the Commonwealth of Australia, Japan, Switzerland or the United States of America.

For the purpose of BIPRU 12.7.3R, a firm may not include a debt security unless:

1. (1)

   the central government or central bank in question has been assessed by at least two eligible ECAIs as having a credit rating associated with credit quality step 1 in the credit quality assessment scale published by the FSA for the purpose of BIPRU 3 (The Standardised Approach: mapping of the ECAIs credit assessments to credit quality steps (Long term mapping)); and

2. (2)

   that debt security is either:

   1. (a)

      denominated in the domestic currency of the country in question; or

   2. (b)

      denominated in a currency other than the domestic currency, provided it is denominated in any of Canadian dollars, euros, Japanese yen, sterling, Swiss francs or United States dollars.

Subject to BIPRU 12.7.6R, for the purpose of BIPRU 12.7.2R (3) a firm may include reserves in the form of sight deposits held by the firm with the central bank of:

1. (1)

   an EEA State; or

2. (2)

   Canada, the Commonwealth of Australia, Japan, Switzerland or the United States of America.

For the purpose of BIPRU 12.7.5R, a firm may not include reserves held at a central bank unless:

1. (1)

   the central bank in question has been assessed by at least two eligible ECAIs as having a credit rating associated with credit quality step 1 in the credit quality assessment scale published by the FSA for the purpose of BIPRU 3 (The Standardised Approach: mapping of the ECAIs credit assessments to credit quality steps (Long term mapping)); and

2. (2)

   those reserves are denominated in the domestic currency of the central bank in question.

For the purposes of BIPRU 12.7.2R (1) and (2), a firm must only count securities:

1. (1)

   which are unencumbered;

2. (2)

   to which it has legal title; and

3. (3)

   which that firm realises on a regular basis.

1. (1)

   For the purpose of BIPRU 12.7.9R (3), a firm must periodically realise a proportion of the assets in its liquid assets buffer through repo or outright sale to the market.

2. (2)

   A firm must also ensure that it periodically realises, through the use of central bank liquidity facilities, a proportion of those of its assets which do not fall into BIPRU 12.7.2R (1)or BIPRU 12.7.2R (2).

3. (3)

   A firm must ensure that in carrying out such periodic realisation:

   1. (a)

      it does so without reference to the firm's day-to-day liquidity needs;

   2. (b)

      it realises in varying amounts the assets in its liquid assets buffer;

   3. (c)

      the cumulative effect of its periodic realisation over any twelve month period is that a significant proportion of the assets in its liquid assets buffer is realised; and

   4. (d)

      in repo to the market and central bank or in collateral swap transactions with a central bank, it enters into transactions of varying durations.

4. (4)

   A firm must establish and maintain a written policy setting out its approach to periodic realisation of its assets.