I. Maturity Mismatch Approach
Including inflows (assets) and outflows (liabilities) in the timebands
188. Outflows (liabilities) must be included in the Maturity Ladder according to their earliest contractual maturity. Contingent liabilities may be excluded from the Maturity Ladder only if there is a likelihood that the conditions necessary to trigger them will not be fulfilled.
189. Inflows (assets) must be included in the Maturity Ladder according to their latest contractual maturity, except that:
(a) undrawn committed standby facilities provided by other banks are included at sight;
(b) marketable assets are included at sight, at a discount, and
(c) assets which have been pledged as Collateral are excluded from the Maturity Ladder.
Including marketable assets in the Maturity Ladder
190. Assets which are readily marketable are included in the Maturity Ladder in the sight - 8 days time band, generally at a discount to their recorded value calculated in accordance with the table below. An asset is regarded as readily marketable if:
(d) prices are regularly quoted for the asset;
(e) the asset is regularly traded;
(f) the asset may readily be sold, including by repurchase agreement, either on an exchange, or in a deep and liquid market for payment in cash; and
(g) settlement is according to a prescribed timetable rather than a negotiated
timetable.
191. The AFSA may allow, on a case by case basis, a Bank to include a longer term asset which is relatively easy to liquidate in the sight - 8 days time band. The discount factor to be applied to types of marketable assets must be determined by reference to the following table:
Benchmark discount | |
Central government debt, Local Authority paper and eligible bank bills (Credit Quality Grade of 1, 2 or 3) | |
Central government and central government- guaranteed marketable Securities with twelve or fewer months’ residual maturity, including treasury bills; and eligible local authority paper and eligible bank bills. | 0% |
Other central government, central government- guaranteed and local authority marketable debt with five or fewer years’ residual maturityor at variable rates. | 5% |
Other central government, central government- guaranteed and local authority marketable debt with over five years’ residual maturity. | 10% |
Other Securities denominated in freely tradable currencies (Credit Quality Grade of 1, 2 or 3) | |
Non-government debt Securities which are Investment Grade, and which have six or fewer months’ residual maturity. | 5% |
Non-government debt Securities which are Investment Grade, and which have five or fewer years’ residual maturity. | 10% |
Non-government debt Securities which are Investment Grade, and which have more than five years’ residual maturity. | 15% |
Equities which qualify for a specific Risk weight no higher than 4%. | 20% |
Other central government debt | |
Where such debt is actively traded. | 20% |
Exposures to a central government or a Central Bank where such Exposures are actively traded | 20% |
Where the issueris a central government or a CentralBank and the issue is actively traded but the credit Exposure is not to the Issuer | 40% |
Non-government, actively-traded Exposures, which are Investment Grade | 60% |
192. The AFSA may vary the discounts to reflect the conditions of a particular market or institution.