Hello WSO. There's a chance that I'm asking this question in the wrong sub forum (maybe better for CF?), but I figured I'd put this out there to you wso bankers and see if I can source some help:
I'm trying to model LCR (liquidity coverage ratio) for a number of banks that will not be subject to reporting the metric after the NPR proposal passes and regulations are loosened on regional/mid-sized banks. Right now, I'm doing this purely on a historical model, nothing is forward looking, so I will have access to reported K's/Q's for B/S data. Most of my comps pool reported LCR for the first time in 4Q18, so I have some historical data to reference... However, I wanted to put it out to the community and hear some thoughts on methodology before I dive in...
LCR = High Quality Liquid Assets (HQLA) / Net 30-day cash outflows.
HQLA: Level 1 securities - Cash, US Treasuries, GNMAs Level 2A: Fannies/Freddies (40% total HQLA cap, 15% asset haircut) Level 2B: Investment grade non-FIG debt & eligible equities
Cash Outflows: (-) Retail deposits (composed of Stable Retail, Other Retail, Brokered Deposits) (-) Unsecured Wholesale (composed of Operational Deposits, Non-Operational funding, Unsecured debt) (-) Secured Wholesale Funding (-) Other Outflows/Various Outflows (composed of: Derivatives, credit related + liquidity facilities, contractual funding obligations, and contingent funding obligations)
Cash Inflows: (+) Secured Lending & Asset Exchange Cash Inflows (+) Retail Cash Inflow (+) Unsecured wholesale cash inflow (+) Other Cash Inflows (Derivative inflow, Securities inflow, Broker-dealer Segregated inflow, Other)
Sourcing information to imply what assets qualify for HQLA is a little convoluted, but I think I'm close... I'm struggling more with the cash flow modeling: How granular do you think is necessary? Also, would you try to try to source categorized data from a K/Q/data feed (S&P?) or would you use historical ratios (i.e. stable deposits as % of total deposit outflows * total retail deposits)?
Any input is greatly appreciated! TIA.
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