Prudential Regulation Authority Rulebook

For the purposes of this Part, the following definitions apply:

1. (1) ‘financial customer’ means a customer, including a financial customer belonging to a non-financial corporate group, which performs one or more of the Annex 1 activities as its main business, or which is one of the following:
1. (a) a credit institution;
2. (b) an investment firm;
3. (c) a securitisation special purpose entity (SSPE);
4. (d) a collective investment undertaking (CIU);
5. (e) a non-open-ended investment scheme;
6. (f) an insurance undertaking;
7. (g) a reinsurance undertaking;
8. (h) a financial holding company or mixed-financial holding company;
9. (i) a financial institution;
10. (j) a pension scheme arrangement as defined in point (10) of Article 2 of Regulation (EU) No 648/2012;
2. (2) ‘retail deposit’ means a liability to a natural person or to an SME, where the natural person or the SME would qualify for the retail exposure class under the Standardised or IRB approaches for credit risk, or a liability to a company which is eligible for the treatment set out in Article 153(4), and where the aggregate deposits by that SME or company on a group basis do not exceed GBP 880,000;
3. (3) ‘personal investment company’ means an undertaking or a trust, the owner or beneficial owner of which is either a natural person or a group of closely related natural persons which does not carry out any other commercial, industrial or professional activity and which was set up with the sole purpose of managing the wealth of the owner or owners, including ancillary activities such as segregating the owners' assets from corporate assets, facilitating the transmission of assets within a family or preventing a split of the assets after the death of a member of the family, provided that those ancillary activities are connected to the main purpose of managing the owners' wealth;
4. (4) ‘deposit broker’ means a natural person or an undertaking that places deposits from third parties, including retail deposits and corporate deposits but excluding deposits from financial customers, with credit institutions in exchange of a fee;
5. (5) ‘unencumbered assets’ (and ‘unencumbered’) means assets which are not subject to any legal, contractual, regulatory or other restriction preventing the institution from liquidating, selling, transferring, assigning or, generally, disposing of those assets via an outright sale or a repurchase agreement;
6. (6) ‘non-mandatory overcollateralisation’ means any amount of assets which the institution is not obliged to attach to a covered bond issuance by virtue of legal or regulatory requirements, contractual commitments or for reasons of market discipline, including in particular where the assets are provided in excess of the minimum legal, statutory or regulatory overcollateralisation requirement applicable to the covered bonds under the national law of the United Kingdom or a third country;
7. (7) ‘asset coverage requirement’ means the ratio of assets to liabilities as determined in accordance with the national law of the United Kingdom or a third country for credit enhancement purposes in relation to covered bonds;
8. (8) ‘margin loans’ means collateralised loans extended to customers for the purpose of taking leveraged trading positions;
9. (9) ‘derivative contracts’ means the derivative contracts listed in Annex II of the CRR and credit derivatives;
10. (10) ‘stress’ (and ‘stressed’) shall, unless the context otherwise indicates, mean a sudden or severe deterioration in the solvency or liquidity position of an institution due to changes in market conditions or idiosyncratic factors as a result of which there is a significant risk that the institution becomes unable to meet its commitments as they become due within the next 30 days;
11. (11) ‘level 1 assets’ means assets of extremely high liquidity and credit quality as referred to in Article 10 of Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
12. (12) ‘level 2 assets’ means assets of high liquidity and credit quality and further subdivided into level 2A and 2B assets in accordance with Articles 11 and 12 of Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
13. (13) ‘liquidity buffer’ means the amount of level 1 assets and level 2 assets that an institution holds in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
14. (14) ‘net liquidity outflows’ means the amount which results from deducting an institution's liquidity inflows from its liquidity outflows;
15. (15) ‘reporting currency’ means pounds sterling unless the institution’s annual accounts are prepared in a different currency, in which case the institution may use that different currency as their reporting currency;
16. (16) ‘factoring’ means a contractual agreement between a business (the ‘assignor’) and a financial entity (the ‘factor’) in which the assignor assigns or sells its receivables to the factor in exchange for the factor providing the assignor with one or more of the following services with regard to the receivables assigned:
1. (a) an advance of a percentage of the amount of the assigned receivables, generally short term, uncommitted and without automatic roll-over;
2. (b) receivables management, collection and credit protection, whereby, in general, the factor administers the assignor's sales ledger and collects the receivables in the factor's own name.
17. For the purposes of Title IV (The Net Stable Funding Ratio), factoring shall be treated as trade finance;
18. (17) ‘committed credit or liquidity facility’ means:
1. (a) a ‘committed credit facility’ which is a credit facility that is irrevocable or conditionally revocable; or
2. (b) a ‘committed liquidity facility’ which is a liquidity facility that is irrevocable or conditionally revocable;
19. (18) ‘clearing member’ means a clearing member as defined in point (14) of Article 2 of Regulation (EU) No 648/2012.

[Note: This rule corresponds to Article 411 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall hold liquid assets, the sum of the values of which covers the liquidity outflows less the liquidity inflows under stressed conditions so as to ensure that institutions maintain levels of liquidity buffers which are adequate to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions over a period of 30 days. During times of stress, institutions may use their liquid assets to cover their net liquidity outflows.

2.

Institutions shall not double count liquidity outflows, liquidity inflows and liquid assets.

Unless specified otherwise in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part, where an item can be counted in more than one outflow category, it shall be counted in the outflow category that produces the greatest contractual outflow for that item.

3.

Institutions may use the liquid assets referred to in paragraph 1 to meet their obligations under stressed circumstances as specified under Article 414.

4.

The provisions set out in Title II (Liquidity Reporting) shall apply exclusively for the purposes of specifying reporting obligations set out in Article 415.

[Note: This rule corresponds to Article 412 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall ensure that long term assets and off-balance sheet items are adequately met with a diverse set of funding instruments that are stable under both normal and stressed conditions.

2.

The provisions set out in Title III (Reporting on Stable Funding) shall apply exclusively for the purpose of specifying reporting obligations set out in Article 415.

[Note: This rule corresponds to Article 413 of the CRR as it applied immediately before revocation by the Treasury.]

1.

An institution that does not meet or does not expect to meet the requirements set out in Article 412, Article 413(1) or Article 428b(2), including during times of stress, shall:

1. (a) notify the competent authority thereof without delay; and
2. (b) submit to the competent authority without undue delay a plan for the restoration of compliance, within a time period that is consistent with the anticipated duration of the stress, with the requirements set out in Article 412, Article 413(1) or Article 428b(2) as appropriate.

2.

An institution that complies with paragraph 1 shall be deemed to have met the requirements in 2.4 and 2.5 of the Notifications Part of the PRA Rulebook in so far as they relate to the requirements set out in Article 412, Article 413(1) or Article 428b(2) (as applicable).

3.

An institution with total assets:

1. (a) equal to or greater than GBP 5 billion on an individual basis or consolidated basis must be capable at all times of reporting to the competent authority at a daily frequency by the end of the business day all of the following templates:
1. (i) Annex XVIII Template C 70 as specified in the Reporting (CRR) Part of the PRA Rulebook;
2. (ii) Annex XXIV Templates C 72, C 73, C 74, C 75 and C 76 as specified in the Reporting (CRR) Part of the PRA Rulebook; and
3. (iii) data item PRA 110 as specified in the Regulatory Reporting Part;
2. (b) of less than GBP 5 billion on an individual basis or consolidated basis must be capable at all times of reporting to the competent authority data item PRA 110 as specified in the Regulatory Reporting Part at a weekly frequency by the end of the business day.

[Note: This rule corresponds to Article 414 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall report the items referred to in the Reporting (CRR) Part of the PRA Rulebook, Title IV (The Net Stable Funding Ratio) and in Chapter 2 of the Liquidity Coverage Ratio Part of the PRA Rulebook to the competent authority in the reporting currency, regardless of the actual denomination of those items.

The reporting frequency shall be at least monthly for items referred to in Chapter 2 of the Liquidity Coverage Ratio Part of the PRA Rulebook and at least quarterly for items referred to in Title IV (The Net Stable Funding Ratio).

2.

An institution shall report separately to the competent authority the items referred to in the Reporting (CRR) Part of the PRA Rulebook, in Title IV (The Net Stable Funding Ratio) and in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, as appropriate, in accordance with the following:

1. (a) where items are denominated in a currency other than the reporting currency and the institution has aggregate liabilities denominated in such a currency which amount to or exceed 5% of the institution's or the single liquidity sub-group's total liabilities, excluding own funds and off-balance sheet items, reporting shall be done in the currency of denomination;
2. (c) where items are denominated in the reporting currency, and the aggregate amount of liabilities in other currencies than the reporting currency amounts to or exceeds 5% of the institution's or the single liquidity subgroup's total liabilities, excluding own funds and off-balance sheet items, the reporting shall be done in the reporting currency.

3.

[Note: Provision left blank]

3a.

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[Note: This rule corresponds to Article 415 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall report the following as liquid assets unless excluded by paragraph 2 and only if the liquid assets fulfil the conditions in paragraph 3:

1. (a) cash and exposures to central banks to the extent that these exposures can be withdrawn at any time in times of stress. As regards deposits held with central banks (including the Bank of England and a central bank of a third country), institutions must have regard to any common understanding or agreement reached between the competent authority and central bank regarding the extent to which minimum reserves can be withdrawn in times of stress;
2. (b) other transferable assets that are of extremely high liquidity and credit quality;
3. (c) transferable assets representing claims on or guaranteed by:
1. (i) the central government of the United Kingdom, a region with fiscal autonomy to raise and collect taxes, or of a third country in the domestic currency of the central or regional government, if the institution incurs a liquidity risk in the United Kingdom or third country that it covers by holding those liquid assets;
2. (ii) central banks and non-central government public sector entities in the domestic currency of the central bank and the public sector entity;
3. (iii) the Bank for International Settlements, the International Monetary Fund and multilateral development banks;
4. (iv) the European Financial Stability Facility and the European Stability Mechanism;
4. (d) transferable assets that are of high liquidity and credit quality;
5. (e) standby credit facilities granted by central banks within the scope of monetary policy to the extent that these facilities are not collateralised by liquid assets and excluding emergency liquidity assistance;
6. (f) if the credit institution belongs to a network in accordance with legal or statutory provisions, the legal or statutory minimum deposits with the central credit institution and other statutory or contractually available liquid funding from the central credit institution.

2.

The following shall not be considered liquid assets:

1. (a) assets that are issued by a credit institution unless they fulfil one of the following conditions:
1. (i) they are bonds eligible for the treatment set out in Article 129(4) or (5) or asset backed instruments if demonstrated to be of the highest credit quality as set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
2. (ii) they are CRR covered bonds other than those referred to in point (i) of this point;
3. (iii) the credit institution has been set up by the central or a regional government of the United Kingdom and that government has an obligation to protect the economic basis of the institution and maintain its viability throughout its lifetime; or the asset is explicitly guaranteed by that government; or at least 90% of the loans granted by the institution are directly or indirectly guaranteed by that government and the asset is predominantly used to fund promotional loans granted on a non-competitive, not for profit basis in order to promote that government's public policy objectives;
2. (b) assets that are provided as collateral to the institution under reverse repo and securities financing transactions and that are held by the institution only as a credit risk mitigant and that are not legally and contractually available for use by the institution;
3. (c) assets issued by any of the following:
1. (i) an investment firm;
2. (ii) an insurance undertaking;
3. (iii) a financial holding company;
4. (iv) a mixed financial holding company;
5. (v) any other entity that performs one or more of the Annex 1 activities as its main business.

3.

In accordance with paragraph 1, institutions shall report assets that fulfil the following conditions as liquid assets:

1. (a) the assets are unencumbered or stand available within collateral pools to be used for obtaining additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded credit lines available to the institution;
2. (b) the assets are not issued by the institution itself, by its parent or subsidiary institutions, or by another subsidiary of its parent institution or parent financial holding company;
3. (c) the price of the assets is generally agreed upon by market participants and can easily be observed in the market or the price can be determined by a formula that is easy to calculate on the basis of publicly available inputs and that does not depend on strong assumptions, as is typically the case for structured or exotic products;
4. (d) the assets are listed on a recognised exchange or they are tradable by an outright sale or via a simple repurchase agreement on repurchase markets; those criteria shall be assessed separately for each market.

The conditions referred to in points (c) and (d) of the first subparagraph shall not apply to the assets referred to in points (a), (e) and (f) of paragraph 1.

5.

Shares or units in CIUs may be treated as liquid assets, up to an absolute amount of GBP 440 million or the equivalent amount in domestic currency, in the portfolio of liquid assets of each institution, provided that the requirements laid down in Article 132(3) are met and that the CIU only invests in liquid assets as referred to in paragraph 1 of this Article, apart from derivatives to mitigate interest rate or credit or currency risk.

The use or potential use by a CIU of derivative instruments to hedge risks of permitted investments shall not prevent that CIU from being eligible for the treatment referred to in the first subparagraph of this paragraph. Where the value of the shares or units of the CIU is not regularly marked to market by the third parties referred to in points (a) and (b) of Article 418(4) and where an institution has not developed robust methodologies and processes for such valuation as referred to in Article 418(4), shares or units in that CIU shall not be treated as liquid assets.

6.

Where a liquid asset ceases to comply with the requirement for liquid assets as set out in this Article, an institution may nevertheless continue to consider it a liquid asset for an additional period of 30 days. Where a liquid asset in a CIU ceases to be eligible for the treatment set out in paragraph 5, the shares or units in the CIU may nevertheless be considered a liquid asset for an additional period of 30 days, provided that those assets do not exceed 10% of the CIU's overall assets.

[Note: This rule corresponds to Article 416 of the CRR as it applied immediately before revocation by the Treasury.]

The institution shall only report as liquid assets those holdings of liquid assets that meet the following conditions:

1. (a) they are appropriately diversified. Diversification is not required in terms of assets corresponding to points (a), (b) and (c) of Article 416(1);
2. (b) they are legally and practically readily available at any time during the next 30 days to be liquidated via outright sale or via a simple repurchase agreement on approved repurchase markets in order to meet obligations coming due. Liquid assets referred to in point (c) of Article 416(1) which are held in third countries where there are transfer restrictions or which are denominated in non-convertible currencies shall be considered available only to the extent that they correspond to outflows in the third country or currency in question, unless the institution has appropriately hedged the ensuing currency risk;
3. (c) the liquid assets are controlled by a liquidity management function;
4. (d) a portion of the liquid assets except those referred to in points (a), (c), (e) and (f) of Article 416(1) is periodically and at least annually liquidated via outright sale or via simple repurchase agreements on an approved repurchase market for the following purposes:
1. (i) to test the access to the market for these assets;
2. (ii) to test the effectiveness of its processes for the liquidation of assets;
3. (iii) to test the usability of the assets;
4. (iv) to minimise the risk of negative signalling during a period of stress;
5. (e) price risks associated with the assets may be hedged but the liquid assets are subject to appropriate internal arrangements that ensure that they are readily available to the treasury when needed and especially that they are not used in other ongoing operations, including:
1. (i) hedging or other trading strategies;
2. (ii) providing credit enhancements in structured transactions;
3. (iii) covering operational costs;
6. (f) the denomination of the liquid assets is consistent with the distribution by currency of liquidity outflows after the deduction of inflows.

[Note: This rule corresponds to Article 417 of the CRR as it applied immediately before revocation by the Treasury.]

1.

The value of a liquid asset to be reported shall be its market value, subject to appropriate haircuts that reflect at least the duration, the credit and liquidity risk and typical repo haircuts in periods of general market stress. The haircuts shall not be less than 15% for the assets referred to in point (d) of Article 416(1). If the institution hedges the price risk associated with an asset, it shall take into account the cash flow resulting from the potential close-out of the hedge.

2.

Shares or units in CIUs as referred to in Article 416(5) shall be subject to haircuts, looking through to the underlying assets as follows:

1. (a) 0% for the assets referred to in point (a) of Article 416(1);
2. (b) 5% for the assets referred to in points (b) and (c) of Article 416(1);
3. (c) 20% for the assets referred to in point (d) of Article 416(1).

3.

The look-through approach referred to in paragraph 2 shall be applied as follows:

1. (a) where the institution is aware of the underlying exposures of a CIU, it may look through to those underlying exposures in order to assign them to points (a) to (d) of Article 416(1);
2. (b) where the institution is not aware of the underlying exposures of a CIU, it shall be assumed that the CIU invests, to the maximum extent allowed under its mandate, in descending order in the asset types referred to in points (a) to (d) of Article 416(1) until the maximum total investment limit is reached.

4.

Institutions shall develop robust methodologies and processes to calculate and report the market value and haircuts for shares or units in CIUs. Only where the materiality of the exposure does not justify the development of their own methodologies, institutions may rely on the following third parties to calculate and report the haircuts for shares or units in CIUs, in accordance with the methods set out in points (a) and (b) of paragraph 3:

1. (a) the depository institution of the CIU provided that the CIU exclusively invests in securities and deposits all securities at this depository institution;
2. (b) for other CIUs, the CIU management company.

The correctness of the calculations by the depository institution or the CIU management company shall be confirmed by an external auditor.

[Note: This rule corresponds to Article 418 of the CRR as it applied immediately before revocation by the Treasury.]

1.

[Note: Provision left blank]

2.

Where the justified needs for liquid assets in light of the requirement in Article 412 are exceeding the availability of those liquid assets in a currency, one or more of the following derogations shall apply:

1. (a) by way of derogation from point (f) of Article 417, the denomination of the liquid assets may be inconsistent with the distribution by currency of liquidity outflows after the deduction of inflows;
2. (b) for currencies of third countries, required liquid assets may be substituted by credit lines from the central banks which are contractually irrevocably committed for the next 30 days and are fairly priced, independent of the amount currently drawn, provided that the competent authority of the third country has a publicly disclosed liquidity framework which provides for the same alternative option as this paragraph (b) and provided that the third country has comparable reporting requirements in place;
3. (c) where there is a deficit of level 1 assets, additional level 2A assets may be held by the institution, subject to higher haircuts, and any cap applicable to those assets in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook may be amended.

3.

The derogations applied in accordance with paragraph 2 shall be inversely proportional to the availability of the relevant assets. The justified needs of institutions shall be assessed taking into account their ability to reduce, by sound liquidity management, the need for those liquid assets and the holdings of those assets by other market participants.

4.

[Note: Provision left blank]

5.

[Note: Provision left blank]

[Note: This rule corresponds to Article 419 of the CRR as it applied immediately before revocation by the Treasury.]

2.

Institutions shall regularly assess the likelihood and potential volume of liquidity outflows during the next 30 days as far as products or services are concerned, which are not captured in Articles 422, 423 and 424 and which they offer or sponsor or which potential purchasers would consider to be associated with them, including but not limited to liquidity outflows resulting from any contractual arrangements such as other off-balance sheet and contingent funding obligations, including, but not limited to committed funding facilities, un-drawn loans and advances to wholesale counterparties, mortgages that have been agreed but not yet drawn down, credit cards, overdrafts, planned outflows related to renewal or extension of new retail or wholesale loans, planned derivative payables and trade finance off-balance sheet related products. These outflows shall be assessed under the assumption of a combined idiosyncratic and market-wide stress scenario.

For this assessment, institutions shall take particular account of material reputational damage that could result from not providing liquidity support to such products or services. Institutions shall report at least once a year to the competent authority those products and services for which the likelihood and potential volume of the liquidity outflows referred to in the first subparagraph are material and institutions shall assign appropriate outflows.

[Note: This rule corresponds to Article 420 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall separately report the amount of retail deposits covered by the UK deposit guarantee scheme or an equivalent deposit guarantee scheme in a third country, and multiply by at least 5% where the deposit is either of the following:

1. (a) part of an established relationship making withdrawal highly unlikely;
2. (b) held in a transactional account, including accounts to which salaries are regularly credited.

2.

Institutions shall multiply other retail deposits not referred to in paragraph 1 by at least 10%.

4.

Notwithstanding paragraphs 1 and 2, institutions shall multiply retail deposits that they have taken in third countries by a higher percentage than provided for in those paragraphs if such percentage is provided by comparable third country reporting requirements.

5.

Institutions may exclude from the calculation of outflows certain clearly circumscribed categories of retail deposits as long as in each and every instance the institution rigorously applies the following for the whole category of those deposits, unless in individually justified circumstances of hardship for the depositor:

1. (a) within 30 days, the depositor is not allowed to withdraw the deposit; or
2. (b) for early withdrawals within 30 days, the depositor has to pay a penalty that includes the loss of interest between the date of withdrawal and the contractual maturity date plus a material penalty that does not have to exceed the interest due for the time elapsed between the date of deposit and the date of withdrawal.

[Note: This rule corresponds to Article 421 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall multiply liabilities resulting from the institution's own operating expenses by 0%.

2.

Institutions shall multiply liabilities resulting from secured lending and capital market-driven transactions as defined in point (3) of Article 192 by:

1. (a) 0% up to the value of the liquid assets in accordance with Article 418 if they are collateralised by assets that would qualify as liquid assets in accordance with Article 416;
2. (b) 100% over the value of the liquid assets in accordance with Article 418, if they are collateralised by assets that would qualify as liquid assets in accordance with Article 416;
3. (c) 100% if they are collateralised by assets that would not qualify as liquid assets in accordance with Article 416, with the exception of transactions covered by points (d) and (e) of this paragraph;
4. (d) 25% if they are collateralised by assets that would not qualify as liquid assets in accordance with Article 416 and the lender is the central government of the United Kingdom, a public sector entity of the United Kingdom or a multilateral development bank. Public sector entities that receive that treatment shall be limited to those that have a risk weight of 20% or lower in accordance with Chapter 2, Title II of Part Three of the CRR;
5. (e) 0% if the lender is a central bank.

3.

Institutions shall multiply liabilities resulting from deposits that have to be maintained:

1. (a) by the depositor in order to obtain clearing, custody or cash management or other comparable services from the institution;
2. (c) by the depositor in the context of an established operational relationship other than that mentioned in point (a);
3. (d) by the depositor to obtain cash clearing and central credit institution services and where the credit institution belongs to a network in accordance with legal or statutory provisions,

by 5% in the case of point (a) to the extent to which they are covered by the UK deposit guarantee scheme or an equivalent deposit guarantee scheme in a third country and by 25% otherwise.

Deposits from credit institutions placed at central credit institutions that are considered as liquid assets in accordance with Article 416(1)(f) shall be multiplied by 100% outflow rate.

4.

Clearing, custody, cash management or other comparable services referred to in points (a) and (d) of paragraph 3 shall only cover those services to the extent that they are rendered in the context of an established relationship on which the depositor has substantial dependence. Those services shall not merely consist of correspondent banking or prime brokerage services, and the institutions shall have evidence that the client is unable to withdraw amounts legally due over a 30-day time horizon without compromising its operational functioning.

5.

Institutions shall multiply liabilities resulting from deposits by clients that are not financial customers to the extent they do not fall under paragraphs 3 and 4 by 40% and shall multiply the amount of these liabilities covered by the UK deposit guarantee scheme or an equivalent deposit guarantee scheme in a third country by 20%.

6.

Institutions shall take outflows and inflows expected over the 30-day horizon from the contracts listed in Annex II of the CRR into account on a net basis across counterparties and shall multiply them by 100% in the case of a net outflow. Net basis shall mean also net of collateral to be received that qualifies as liquid assets under Article 416.

7.

Institutions shall separately report other liabilities that do not fall under paragraphs 1 to 5.

8.

An institution may apply to the competent authority for permission to apply a lower outflow percentage to the liabilities referred to in paragraph 7 on a case-by-case basis with a counterparty who:

1. (a) is any of the following:
1. (i) a UK parent institution or subsidiary institution of the institution or another subsidiary of the same parent institution;
2. (ii) linked to the institution by a common management relationship; or
3. (iii) the central institution or a member of a network compliant with point (d) of Article 400 (2);
2. (b) applies a corresponding symmetric or more conservative inflow by way of derogation from Article 425; and
3. (c) is established in the United Kingdom.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

[Note: This rule corresponds to Article 422 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Collateral other than assets referred to in Article 416(1)(a), (b) and (c), which is posted by the institution for contracts listed in Annex II of the CRR and credit derivatives, shall be subject to an additional outflow of 20%.

2.

An institution shall notify the competent authority of all contracts entered into of which the contractual conditions lead to liquidity outflows or additional collateral needs, within 30 days after a material deterioration of the institution's credit quality. Where those contracts are material in relation to the potential liquidity outflows of the institution, the institution shall add an appropriate additional outflow for those contracts, which shall correspond to the additional collateral needs resulting from a material deterioration in its credit quality, such as a downgrade in its external credit assessment. The institution shall regularly review the extent of any such material deterioration in light of what is relevant under the contracts it has entered into, and shall notify the result of its review to the competent authority.

3.

The institution shall add an additional outflow which shall correspond to the collateral needs that would result from the impact of an adverse market scenario on its derivatives transactions if material.

4.

The institution shall add an additional outflow corresponding to the market value of securities or other assets sold short and to be delivered within the 30-day horizon unless the institution owns the securities to be delivered or has borrowed them at terms requiring their return only after the 30-day horizon and the securities do not form part of the institution’s liquid assets.

5.

The institution shall add an additional outflow corresponding to:

1. (a) the excess collateral the institution holds that can be contractually called at any time by the counterparty;
2. (b) collateral that is due to be returned to a counterparty;
3. (c) collateral that corresponds to assets that would qualify as liquid assets for the purposes of Article 416 that can be substituted for assets corresponding to assets that would not qualify as liquid assets for the purposes of Article 416 without the consent of the institution.

6.

Deposits received as collateral shall not be considered liabilities for the purposes of Article 422 but will be subject to the provisions of this Article where applicable.

[Note: This rule corresponds to Article 423 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall report outflows from committed credit facilities and committed liquidity facilities, which shall be determined as a percentage of the maximum amount that can be drawn within the next 30 days. This maximum amount that can be drawn may be assessed net of any liquidity requirement that would be mandated under Article 420(2) for the trade finance off-balance sheet items and net of the value in accordance with Article 418 of collateral to be provided if the institution can reuse the collateral and if the collateral is held in the form of liquid assets in accordance with Article 416. The collateral to be provided shall not be assets issued by the counterparty of the facility or one of its affiliated entities. If the necessary information is available to the institution, the maximum amount that can be drawn for credit and liquidity facilities shall be determined as the maximum amount that could be drawn given the counterparty's own obligations or given the pre-defined contractual drawdown schedule coming due over the next 30 days.

2.

The maximum amount that can be drawn of undrawn committed credit facilities and undrawn committed liquidity facilities within the next 30 days shall be multiplied by 5% if they qualify for the retail exposure class under the Standardised or IRB approaches for credit risk.

3.

The maximum amount that can be drawn of undrawn committed credit facilities and undrawn committed liquidity facilities within the next 30 days shall be multiplied by 10% where they meet the following conditions:

1. (a) they do not qualify for the retail exposure class under the Standardised or IRB approaches for credit risk;
2. (b) they have been provided to clients that are not financial customers;
3. (c) they have not been provided for the purpose of replacing funding of the client in situations where they are unable to obtain their funding requirements in the financial markets.

4.

The committed amount of a liquidity facility that has been provided to an SSPE for the purpose of enabling that SSPE to purchase assets, other than securities, from clients that are not financial customers shall be multiplied by 10%, provided that the committed amount exceeds the amount of assets currently purchased from clients and that the maximum amount that can be drawn is contractually limited to the amount of assets currently purchased.

5.

The institutions shall report the maximum amount that can be drawn of other undrawn committed credit facilities and undrawn committed liquidity facilities within the next 30 days. This applies in particular to the following:

1. (a) liquidity facilities that the institution has granted to SSPEs other than those referred to in point (b) of paragraph 3;
2. (b) arrangements under which the institution is required to buy or swap assets from an SSPE;
3. (c) facilities extended to credit institutions;
4. (d) facilities extended to financial institutions and investment firms.

6.

By way of derogation from paragraph 5, institutions which have been set up and are sponsored by the central or a regional government of the United Kingdom may apply the treatments set out in paragraphs 2 and 3 also to credit and liquidity facilities that are provided to institutions for the sole purpose of directly or indirectly funding promotional loans qualifying for the exposure classes referred to in those paragraphs. By way of derogation from point (g) of Article 425(2), where those promotional loans are extended via another institution as intermediary (pass through loans), a symmetric in and outflow may be applied by institutions. Those promotional loans shall be available only to persons who are not financial customers on a non-competitive, not for profit basis in order to promote public policy objectives of the central or regional government. It shall only be possible to draw on such facilities following the reasonably expected demand for a promotional loan and up to the amount of such demand linked to a subsequent reporting on the use of the funds disbursed.

[Note: This rule corresponds to Article 424 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Institutions shall report their liquidity inflows. Capped liquidity inflows shall be the liquidity inflows limited to 75% of liquidity outflows. Institutions may exempt liquidity inflows from deposits placed with other institutions and qualifying for the treatments set out in Article 113(6) from this limit. Institutions may exempt liquidity inflows from monies due from borrowers and bond investors related to mortgage lending funded by bonds eligible for the treatment set out in Article 129(4), (5) or (6) or by CRR covered bonds from this limit. Institutions may exempt inflows from promotional loans that the institutions have passed through. An institution may apply to the competent authority for permission fully or partially to exempt inflows where the provider is a parent or a subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a common management relationship.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

2.

The liquidity inflows shall be measured over the next 30 days. They shall comprise only contractual inflows from exposures that are not past due and for which the institution has no reason to expect non-performance within the 30-day time horizon. Liquidity inflows shall be reported in full with the following inflows reported separately:

1. (a) monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50% of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph.
   By way of derogation from the first subparagraph of this point, institutions that have received a commitment referred to in Article 424(6) in order for them to disburse a promotional loan to a final recipient may take an inflow into account up to the amount of the outflow they apply to the corresponding commitment to extend those promotional loans;
2. (b) monies due from trade financing transactions referred to in point (b) of the second subparagraph of Article 162(3) with a residual maturity of up to 30 days, shall be taken into account in full as inflows;
3. (c) loans with an undefined contractual end date shall be taken into account with a 20% inflow, provided that the contract allows the institution to withdraw and request payment within 30 days;
4. (d) monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 if they are collateralised by liquid assets as referred to in Article 416(1), shall not be taken into account up to the value net of haircuts of the liquid assets and shall be taken into account in full for the remaining monies due;
5. (e) monies due that the institution owing those monies treats in accordance with Article 422(3) and (4), shall be multiplied by a corresponding symmetrical inflow;
6. (f) monies due from positions in major index equity instruments provided that there is no double counting with liquid assets;
7. (g) any undrawn credit or liquidity facilities and any other commitments received shall not be taken into account.

3.

Outflows and inflows expected over the 30-day horizon from the contracts listed in Annex II of the CRR shall be reflected on a net basis across counterparties and shall be multiplied by 100% in the event of a net inflow. Net basis shall mean also net of collateral to be received that qualifies as liquid assets under Article 416.

4.

By way of derogation from point (g) of paragraph 2, an institution may apply to the competent authority for permission to apply a higher inflow on a case-by-case basis for credit and liquidity facilities with a counterparty who:

1. (a) is a UK parent institution or subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a common management relationship;
2. (b) applies a corresponding symmetric or more conservative outflow by way of derogation from Articles 422, 423 and 424; and
3. (c) is established in the United Kingdom.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

7.

Institutions shall not report inflows from any of the liquid assets reported in accordance with Article 416 other than payments due on the assets that are not reflected in the market value of the asset.

8.

Institutions shall not report inflows from any new obligations entered into.

9.

Institutions shall take liquidity inflows which are to be received in third countries where there are transfer restrictions or which are denominated in non-convertible currencies into account only to the extent that they correspond to outflows respectively in the third country or currency in question.

[Note: This rule corresponds to Article 425 of the CRR as it applied immediately before revocation by the Treasury.]

[Note: Provision left blank]

1.

Institutions shall report to the competent authority in accordance with the reporting requirements set out in Article 415(1) and the uniform reporting formats referred to in the Reporting (CRR) Part of the PRA Rulebook, the following items and their components in order to allow an assessment of the availability of stable funding:

1. (a) the following own funds, after deductions have been applied, where appropriate:
1. (i) Tier 1 capital instruments;
2. (ii) Tier 2 capital instruments;
3. (iii) other preferred shares and capital instruments in excess of Tier 2 allowable amount having an effective maturity of one year or greater;
2. (b) the following liabilities not included in point (a):
1. (i) retail deposits that qualify for the treatment set out in Article 421(1);
2. (ii) retail deposits that qualify for the treatment set out in Article 421(2);
3. (iii) deposits that qualify for the treatment set out in Article 422 (3) and (4);
4. (iv) of the deposits referred to in point (iii), those that are subject to the UK deposit guarantee scheme or an equivalent deposit guarantee scheme in a third country deposit guarantees within the terms of Article 421(1);
5. (vi) of the deposits referred to in point (iii), those that fall under point (d) of Article 422 (3);
6. (vii) amounts deposited not falling under point (i), (ii) or (iii) if they are not deposited by financial customers;
7. (viii) all funding obtained from financial customers;
8. (ix) separately for amounts falling under points (vii) and (viii) respectively, funding from secured lending and capital market-driven transactions as defined in point (3) of Article 192:
1. — collateralised by assets that would qualify as liquid assets in accordance with Article 416;
2. — collateralised by any other assets;
9. (x) liabilities resulting from securities issued qualifying for the treatment set out in Article 129(4) or (5) or CRR covered bonds;
10. (xi) the following other liabilities resulting from securities issued that do not fall under point (a):
1. — liabilities resulting from securities issued with an effective maturity of one year or greater;
2. — liabilities resulting from securities issued with an effective maturity of less than one year;
11. (xii) any other liabilities.

2.

Where applicable, all items shall be presented in the following five buckets according to the closest of their maturity date and the earliest date at which they can contractually be called:

1. (a) within three months;
2. (b) between three and six months;
3. (c) between six and nine months;
4. (d) between nine and 12 months;
5. (e) after 12 months.

[Note: This rule corresponds to Article 427 of the CRR as it applied immediately before revocation by the Treasury.]

1.

Unless deducted from own funds, the following items shall be reported to the competent authority separately in order to allow an assessment of the needs for stable funding:

1. (a) the assets that would qualify as liquid assets in accordance with Article 416, broken down by asset type;
2. (b) the following securities and money market instruments not included in point (a):
1. (i) assets qualifying for credit step 1 under Article 122;
2. (ii) assets qualifying for credit step 2 under Article 122;
3. (iii) other assets;
3. (c) equity securities of non-financial entities listed on a major index in a recognised exchange;
4. (d) other equity securities;
5. (e) gold;
6. (f) other precious metals;
7. (g) non-renewable loans and receivables, and separately those non-renewable loans and receivables for which borrowers are:
1. (i) natural persons other than commercial sole proprietors and partnerships;
2. (ii) SMEs that qualify for the retail exposure class under the Standardised or IRB approaches for credit risk or to a company which is eligible for the treatment set out in Article 153(4) and where the aggregate deposit placed by that client or group of connected clients is less than GBP 880,000;
3. (iii) sovereigns, central banks and public sector entities;
4. (iv) clients not referred to in points (i) and (ii) other than financial customers;
5. (v) clients not referred to in points (i), (ii) and (iii) that are financial customers, and thereof separately those that are credit institutions and other financial customers;
8. (h) non-renewable loans and receivables referred to in point (g), and thereof separately those that are:
1. (i) collateralised by commercial immovable property (CRE);
2. (ii) collateralised by residential property (RRE);
3. (iii) match funded (pass-through) via bonds eligible for the treatment set out in Article 129(4) or (5) or via CRR covered bonds;
9. (i) derivatives receivables;
10. (j) any other assets;
11. (k) undrawn committed credit facilities that qualify as 'medium risk' or 'medium/low risk' under Annex I of the CRR.

2.

Where applicable, all items shall be presented in the five buckets described in Article 427(2).

[Note: This rule corresponds to Article 428 of the CRR as it applied immediately before revocation by the Treasury.]

Where the net stable funding ratio set out in this Title IV (The Net Stable Funding Ratio) applies on a consolidated basis in accordance with rule 2.4 of this Part, the following provisions shall apply:

1. (a) the assets and off-balance sheet items of a subsidiary having its head office in a third country which are subject to required stable funding factors under the net stable funding requirement set out in the national law of that third country that are higher than those specified in Chapter 4 of Title IV (The Net Stable Funding Ratio) shall be subject to consolidation in accordance with the higher factors specified in the national law of that third country;
2. (b) the liabilities and own funds of a subsidiary having its head office in a third country which are subject to available stable funding factors under the net stable funding requirement set out in the national law of that third country that are lower than those specified in Chapter 3 of Title IV (The Net Stable Funding Ratio) shall be subject to consolidation in accordance with the lower factors specified in the national law of that third country;
3. (c) third country assets which meet the requirements laid down in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook and which are held by a subsidiary having its head office in a third country shall not be recognised as liquid assets for consolidation purposes where they do not qualify as liquid assets under the national law of that third country which sets out the liquidity coverage requirement.

1.

The net stable funding requirement laid down in Article 413(1) shall be equal to the ratio of the institution's available stable funding as referred to in Chapter 3 of Title IV (The Net Stable Funding Ratio) to the institution's required stable funding as referred to in Chapter 4 of Title IV (The Net Stable Funding Ratio), and shall be expressed as a percentage. Institutions shall calculate their net stable funding ratio in accordance with the following formula:

2.

Institutions shall maintain a net stable funding ratio of at least 100%, calculated in the reporting currency for all their transactions, irrespective of their actual currency denomination.

3.

Where, at any time, the net stable funding ratio of an institution has fallen below 100%, or can be reasonably expected to fall below 100%, the requirement laid down in Article 414 shall apply. The institution shall aim to restore its net stable funding ratio to the level referred to in paragraph 2 of this Article.

4.

Institutions shall calculate and monitor their net stable funding ratio in the reporting currency for all their transactions, irrespective of their actual currency denomination, and separately for their transactions denominated in each of the currencies that is subject to separate reporting in accordance with Article 415(2).

5.

Institutions shall ensure that the distribution of their funding profile by currency denomination is generally consistent with the distribution of their assets by currency.

1.

Unless otherwise specified in this Title IV (The Net Stable Funding Ratio), institutions shall take into account assets, liabilities and off-balance sheet items on a gross basis.

2.

For the purpose of calculating their net stable funding ratio, institutions shall apply the appropriate stable funding factors set out in Chapters 3 and 4 of Title IV (The Net Stable Funding Ratio) to the accounting value of their assets, liabilities and off-balance sheet items, unless otherwise specified in this Title IV (The Net Stable Funding Ratio).

3.

Institutions shall not double count required stable funding and available stable funding.

Unless otherwise specified in this Title IV (The Net Stable Funding Ratio), where an item can be allocated to more than one required stable funding category, it shall be allocated to the required stable funding category that produces the greatest contractual required stable funding for that item.

1.

Institutions shall apply this Article to calculate the amount of required stable funding for derivative contracts as referred to in Chapters 3, 4, 6 and 7 of Title IV (The Net Stable Funding Ratio).

2.

Without prejudice to Articles 428ah(2) and 428az(2), institutions shall take into account the fair value of derivative positions on a net basis where those positions are included in the same netting set that fulfils the requirements referred to in Article 428d(2A). Where that is not the case, institutions shall take into account the fair value of derivative positions on a gross basis and shall treat those derivative positions as belonging to their own netting set for the purposes of Chapter 4 of Title IV (The Net Stable Funding Ratio).

2A.

For the purposes of Article 428d(2), institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295 of the CRR. Institutions shall not take into account cross-product netting, but may net within the product category as referred to in point (25)(c) of Article 272 of the CRR and credit derivatives where they are subject to a contractual cross-product netting agreement as referred to in point (c) of Article 295 of the CRR.

3.

For the purposes of this Title IV (The Net Stable Funding Ratio), the ‘fair value of a netting set’ means the sum of the fair values of all the transactions included in a netting set.

4.

Without prejudice to Articles 428ah(2) and 428az(2), all derivative contracts listed in points 2(a) to (e) of Annex II of the CRR that involve a full exchange of principal amounts on the same date shall be calculated on a net basis across currencies, including for the purpose of reporting in a currency that is subject to separate reporting in accordance with Article 415(2), even where those transactions are not included in the same netting set that fulfils the requirements set out in Article 428d(2A).

5.

Cash received as collateral to mitigate the exposure of a derivative position shall be treated as such and shall not be treated as deposits to which Chapters 3 and 6 of Title IV (The Net Stable Funding Ratio) applies.

1.

This Article applies to initial margin, variation margin and derivatives assets and liabilities that are directly linked to derivative client clearing activities with a QCCP where the institution acts as clearing member, provided that:

1. (a) initial margin shall include:
1. (i) all amounts posted to the QCCP; and
2. (ii) amounts in excess of the amount posted to a QCCP only to the extent that such amounts are segregated from the assets of the institution and, as a result of that segregation, are not available to the institution freely to dispose of or exchange; and
2. (b) the institution does not provide to its clients guarantees of the performance of the QCCP and, as a result, does not incur any funding risk.

2.

Notwithstanding any other provision of this Part, where this Article applies institutions may exclude all amounts included in paragraph 1 from the calculation of the amount of required stable funding and available stable funding in accordance with Chapters 3 to 8, inclusive, of Title IV (The Net Stable Funding Ratio). If all amounts are not excluded the institution shall calculate the amount of required stable funding and available stable funding in accordance with Title IV (The Net Stable Funding Ratio).

3.

Where providing derivative client clearing services in its capacity as a clearing member of a QCCP the institution receives initial margin collateral from clients that is not included in paragraph 1(a):

1. (a) collateral assets accounted for on the balance sheet of the institution shall be subject to a required stable funding factor in accordance with Chapter 4 or Chapter 7 of Title IV (The Net Stable Funding Ratio); and
2. (b) associated liabilities shall be subject to an available stable funding factor in accordance with Chapter 3 or Chapter 6 of Title IV (The Net Stable Funding Ratio).

1.

Assets and liabilities resulting from securities financing transactions and long settlement transactions with a single counterparty shall be calculated on a net basis, provided that those assets and liabilities meet the following netting conditions:

1. (a) the transactions have the same explicit final settlement date;
2. (b) the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable in the normal course of business and in the event of default, insolvency and bankruptcy;
3. (c) the counterparties intend to settle on a net basis or to settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.

2.

For purposes of point (c) of paragraph 1 institutions may consider that a settlement mechanism results in the functional equivalent of net settlement only where, on the settlement date, the net result of the cash flows of the transactions under that mechanism is equal to the single net amount under net settlement and all the following conditions are met:

1. (a) the transactions are settled through the same settlement system or settlement systems using a common settlement infrastructure;
2. (b) the settlement arrangements are supported by cash or intraday credit facilities intended to ensure that the settlement of the transactions will occur by the end of the business day;
3. (c) any issues arising from the securities legs of the securities financing transactions do not interfere with the completion of the net settlement of the cash receivables and payables.

3.

The condition set out in point (c) of paragraph 1 is met only where the failure of any securities financing transaction in the settlement mechanism may delay settlement of only the matching cash leg or may create an obligation to the settlement mechanism, supported by an associated credit facility.

Where there is a failure of the securities leg of a securities financing transaction in the settlement mechanism at the end of the window for settlement in the settlement mechanism, institutions shall split out this transaction and its matching cash leg from the netting set and treat them on a gross basis.

1.

An institution may apply to the competent authority for permission to treat an asset and a liability as interdependent. For the purpose of this Article, an asset and a liability are interdependent where either conditions (a) to (f) below are met or where paragraph 2 applies:

1. (a) the institution acts solely as a pass-through unit to channel the funding from the liability into the corresponding interdependent asset;
2. (b) the individual interdependent assets and liabilities are clearly identifiable and have the same principal amount;
3. (c) the asset and interdependent liability have matched maturities;
4. (d) the interdependent liability has been requested pursuant to a legal, regulatory or contractual commitment and is not used to fund other assets;
5. (e) the principal payment flows from the asset are not used for other purposes than repaying the interdependent liability; and
6. (f) the counterparties for each pair of interdependent assets and liabilities are not the same.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

2.

This paragraph applies to an institution's unencumbered physical stock of precious metals and customer deposit accounts in precious metals where all of the following conditions are met:

1. (a) the institution’s unencumbered physical stock of each precious metal is used to cover customer deposit accounts in the same precious metal;
2. (b) the institution is not exposed to liquidity or market risk resulting from either the sale of precious metals by the customer or the physical settlement of customer transactions in precious metals; and
3. (c) the precious metals assets and liabilities are on the balance sheet of the institution.

3.

For the purpose of paragraph 2:

1. (a) precious metals means gold, silver, platinum or palladium;
2. (b) the interdependent asset and liability treatment shall only be available to the extent that the institution's unencumbered physical stock of each precious metal is matched by customer deposits of the same precious metal. Any excess physical stock or customer deposits in a precious metal shall not be treated as an interdependent asset or liability for the purpose of paragraph 1;
3. (c) an institution’s precious metals accounts at any other institution shall not be considered a part of the institution’s physical stock of precious metals.

1.

By way of derogation from Chapters 3 and 4 of Title IV (The Net Stable Funding Ratio) an institution may apply to the competent authority for permission to apply a higher available stable funding factor or a lower required stable funding factor to assets, liabilities and committed credit or liquidity facilities with a counterparty who:

1. (a) is one of the following:
1. (i) the parent or a subsidiary of the institution;
2. (ii) another subsidiary of the same parent;
3. (iii) an undertaking that is related to the institution within the meaning of provisions implementing Article 22(7) of Directive 2013/34/EU;
2. (b) applies a required stable funding factor that is equal to or higher than the higher available stable funding factor or applies an available stable funding factor that is equal to or lower than the lower required stable funding factor; and
3. (c) is established in the United Kingdom.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

Unless otherwise specified in this Chapter 3 of Title IV (The Net Stable Funding Ratio), the amount of available stable funding shall be calculated by multiplying the accounting value of various categories or types of liabilities and own funds by the available stable funding factors to be applied under Section 2. The total amount of available stable funding shall be the sum of the weighted amounts of liabilities and own funds.

Bonds and other debt securities that are issued by the institution, sold exclusively in the retail market, and held in a retail account, may be treated as belonging to the appropriate retail deposit category. Limitations shall be in place, such that those instruments cannot be bought and held by parties other than retail customers.

1.

Unless otherwise specified in this Chapter 3 of Title IV (The Net Stable Funding Ratio), institutions shall take into account the residual contractual maturity of their liabilities and own funds to determine the available stable funding factors to be applied under Section 2.

2.

Institutions shall take into account existing options in determining the residual maturity of a liability or of own funds in a prudent manner. They shall do so on the assumption that the counterparty will redeem call options at the earliest possible date. For options exercisable at the discretion of the institution, the institution shall take into account reputational factors that may limit an institution's ability not to exercise the option, in particular market expectations that institutions should redeem certain liabilities before their maturity.

3.

Institutions shall treat deposits with fixed notice periods in accordance with their notice period, and shall treat term deposits in accordance with their residual maturity. By way of derogation from paragraph 2 of this Article, institutions shall not take into account options for early withdrawals where the depositor has to pay a material penalty for early withdrawals which occur in less than one year, such penalty being laid down in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, to determine the residual maturity of term retail deposits.

4.

In order to determine the available stable funding factors to be applied under Section 2, institutions shall treat any portion of liabilities having a residual maturity of one year or more that matures in less than six months and any portion of such liabilities that matures between six months and less than one year as having a residual maturity of less than six months and between six months and less than one year, respectively.

1.

Unless otherwise specified in Articles 428l to 428o, all liabilities without a stated maturity, including short positions and open maturity positions, shall be subject to a 0% available stable funding factor, with the exception of the following:

1. (a) deferred tax liabilities, which shall be treated in accordance with the nearest possible date on which such liabilities could be realised;
2. (b) minority interests, which shall be treated in accordance with the term of the instrument.

2.

Deferred tax liabilities and minority interests as referred to in paragraph 1 shall be subject to one of the following factors:

1. (a) 0%, where the effective residual maturity of the deferred tax liability or minority interest is less than six months;
2. (b) 50%, where the effective residual maturity of the deferred tax liability or minority interest is a minimum of six months but less than one year;
3. (c) 100%, where the effective residual maturity of the deferred tax liability or minority interest is one year or more.

3.

The following liabilities and capital items or instruments shall be subject to a 0% available stable funding factor:

1. (a) trade date payables arising from purchases of financial instruments, of foreign currencies and of commodities, that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transactions, or that have failed to settle but are nonetheless expected to settle;
2. (b) liabilities that are categorised as being interdependent with assets in accordance with Article 428f;
3. (c) liabilities with a residual maturity of less than six months provided by:
1. (i) the Bank of England;
2. (ii) the central bank of a third country;
3. (iii) financial customers;
4. (d) any other liabilities and capital items or instruments not referred to in Articles 428l to 428o.

4.

Institutions shall apply a 0% available stable funding factor to the absolute value of the difference, if negative, between the sum of fair values across all netting sets with positive fair value and the sum of fair values across all netting sets with negative fair value calculated in accordance with Article 428d.

The following rules shall apply to the calculation referred to in the first subparagraph:

1. (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value, only up to the extent that it results in the netting set having zero fair value, where the collateral received as variation margin qualifies as a level 1 asset pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified in that Chapter, and where institutions are legally entitled and operationally able to reuse that collateral;
2. (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value only up to the extent that it results in the netting set having zero fair value.

The following liabilities and capital items or instruments shall be subject to a 50% available stable funding factor:

1. (a) deposits received that fulfil the criteria for operational deposits set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
2. (b) liabilities with a residual maturity of less than one year provided by:
1. (i) the central government of the United Kingdom or of a third country;
2. (ii) regional governments or local authorities of the United Kingdom or a third country;
3. (iii) public sector entities in the United Kingdom or in a third country;
4. (iv) multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
5. (v) non-financial corporate customers;
6. (vi) credit unions authorised by the competent authority, personal investment companies and clients that are deposit brokers to the extent that those liabilities do not fall under point (a) of this paragraph;
3. (c) liabilities with a residual contractual maturity of a minimum of six months but less than one year that are provided by:
1. (i) the Bank of England;
2. (ii) the central bank of a third country;
3. (iii) financial customers;
4. (d) any other liabilities and capital items or instruments with a residual maturity of a minimum of six months but less than one year not referred to in Articles 428m, 428n and 428o.

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for other retail deposits set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 90% available stable funding factor.

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for stable retail deposits set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 95% available stable funding factor.

The following liabilities and capital items and instruments shall be subject to a 100% available stable funding factor:

1. (a) the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79;
2. (b) the Additional Tier 1 items of the institution before the deduction of the items referred to in Article 56 and before Article 79 has been applied thereto, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
3. (c) the Tier 2 items of the institution before the deductions referred to in Article 66 and before the application of Article 79, having a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
4. (d) any other capital instruments of the institution with a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
5. (e) any other secured and unsecured borrowings and liabilities with a residual maturity of one year or more, including term deposits, unless otherwise specified in Articles 428k to 428n.

1.

Unless otherwise specified in this Chapter 4 of Title IV (The Net Stable Funding Ratio), the amount of required stable funding shall be calculated by multiplying the accounting value of various categories or types of assets and off-balance sheet items by the required stable funding factors to be applied in accordance with Section 2 of this Chapter. The total amount of required stable funding shall be the sum of the weighted amounts of assets and off-balance sheet items.

2.

Assets which institutions have borrowed or otherwise acquired in securities financing transactions, shall be subject to the required stable funding factors to be applied under Section 2 of this Chapter where those assets are accounted for on the balance sheet of the institution or where the institution is exposed to all or substantially all of the economic risk and reward in respect of those assets. Otherwise, such assets shall be excluded from the calculation of the amount of required stable funding.

3.

Assets that institutions have lent or otherwise disposed of in securities financing transactions which the institution keeps on balance sheet or in respect of which the institution retains exposure to all or substantially all of the economic risk and reward, shall be considered as encumbered assets for the purposes of this Chapter 4 of Title IV (The Net Stable Funding Ratio) and shall be subject to the required stable funding factors to be applied under Section 2, even where the assets do not remain on the balance sheet of the institution. Otherwise, such assets shall be excluded from the calculation of the amount of required stable funding.

4.

Assets that are encumbered for a residual maturity of six months or longer shall be assigned either the required stable funding factor that would be applied under Section 2 to those assets if they were held unencumbered or the required stable funding factor that is otherwise applicable to those encumbered assets, whichever factor is higher. The same shall apply where the residual maturity of the encumbered assets is shorter than the residual maturity of the transaction that is the source of encumbrance.

Assets that have less than six months remaining in the encumbrance period shall be subject to the required stable funding factors to be applied under Section 2 to the same assets if they were held unencumbered.

5.

Where an institution reuses or repledges an asset that was borrowed, including in securities financing transactions, and that asset is accounted for off-balance sheet, the transaction in relation to which that asset has been borrowed shall be treated as encumbered, provided that the transaction cannot mature without the institution returning the asset borrowed.

6.

The following assets shall be considered to be unencumbered:

1. (a) assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded, credit lines that are available to the institution; those assets shall include assets placed by a credit institution with a central institution in a cooperative network or institutional protection scheme; institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, starting with assets ineligible for the liquidity buffer;
2. (b) assets that the institution has received as collateral for credit risk mitigation purposes in secured lending, secured funding or collateral exchange transactions and that the institution may dispose of;
3. (c) assets attached as non-mandatory overcollateralisation to a covered bond issuance.

8.

In order to avoid any double counting, institutions shall exclude assets that are associated with collateral that is recognised as variation margin posted in accordance with point (b) of Article 428k(4) and 428ah(2), recognised as initial margin posted, or recognised as a contribution to the default fund of a CCP in accordance with points (a) and (b) of Article 428ag from other parts of calculation of the amount of required stable funding in accordance with this Chapter 4 of Title IV (The Net Stable Funding Ratio). This paragraph 8 does not apply to collateral assets associated with excess variation margin posted and not already recognised in point (b) of Article 428k(4) or Article 428ah(2), which institutions shall take into account in other parts of the calculation of the amount of required stable funding in accordance with this Chapter 4 of Title IV (The Net Stable Funding Ratio).

9.

Institutions shall include foreign currencies and commodities for which a purchase order has been executed in the calculation of the amount of required stable funding financial instruments. They shall exclude financial instruments, foreign currencies and commodities for which a sale order has been executed from the calculation of the amount of required stable funding, provided that those transactions are not reflected as derivatives or secured funding transactions on the institutions' balance sheet and that those transactions are to be reflected on the institutions' balance sheet when settled.

10.

Institutions shall apply appropriate stable funding factors to off-balance sheet exposures that are not referred to in this Chapter 4 of Title IV (The Net Stable Funding Ratio) to ensure that they hold an appropriate amount of available stable funding for the portion of those exposures that are expected to require funding over the one-year horizon of the net stable funding ratio. When considering those factors, institutions shall, in particular, take into account the material reputational damage to the institution that could result from not providing that funding.

1.

Unless otherwise specified in this Chapter 4 of Title IV (The Net Stable Funding Ratio), institutions shall take into account the residual contractual maturity of their assets and off-balance sheet transactions when determining the required stable funding factors to be applied to their assets and off-balance sheet items under Section 2.

2.

Institutions shall treat assets that have been segregated in accordance with Article 11(3) of Regulation (EU) No 648/2012 in accordance with the underlying exposure of those assets. Institutions shall, however, subject those assets to higher required stable funding factors, based on the term of encumbrance of those assets. For these purposes, segregated assets are encumbered when the institution is not able freely to dispose of or exchange such assets. Institutions shall consider the term of encumbrance to be the same as the term of the liabilities which generated the segregation requirement.

3.

When calculating the residual maturity of an asset, institutions shall take options into account in a prudent manner. Institutions shall assume that the issuer or counterparty will exercise any option to extend the maturity of an asset. For options that are exercisable at the discretion of the institution, the institution shall take into account reputational factors that may limit the institution's ability not to exercise the option, in particular markets' and clients' expectations that the institution should extend the maturity of certain assets at their maturity date.

4.

In order to determine the required stable funding factors to be applied in accordance with Section 2, for amortising loans with a residual contractual maturity of one year or more, any portion that matures in less than six months and any portion that matures between six months and less than one year shall be treated as having a residual maturity of less than six months and between six months and less than one year, respectively.

1.

The following assets shall be subject to a 0% required stable funding factor:

1. (a) unencumbered assets that are eligible as level 1 high quality liquid assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified in that Chapter, regardless of whether they comply with the operational requirements as set out in that Chapter;
2. (b) unencumbered shares or units in CIUs that are eligible for a 0% haircut for the calculation of the liquidity coverage ratio pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer set out in that Chapter;
3. (c) all reserves held by the institution with the Bank of England or the central bank of a third country, including required reserves and excess reserves;
4. (d) all claims on the Bank of England or the central bank of a third country that have a residual maturity of less than six months;
5. (e) trade date receivables arising from sales of financial instruments, foreign currencies or commodities that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or that have failed to settle but are nonetheless expected to settle;
6. (f) assets that are categorised as being interdependent with liabilities in accordance with Article 428f;
7. (g) monies due from securities financing transactions with financial customers, where those transactions have a residual maturity of less than six months, where those monies due are collateralised by assets that qualify as level 1 assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified therein, and where the institution would be legally entitled and operationally able to reuse those assets for the duration of the transaction.

Institutions shall take the monies due referred to in point (g) of the first subparagraph of this paragraph into account on a net basis where Article 428e applies.

2.

By way of derogation from point (c) of paragraph 1, institutions shall apply a higher required stable funding factor to required reserves which shall be:

1. (a) the required stable funding factor for required reserves that is prescribed by the national law of the third country in which the relevant central bank is located; or
2. (b) if there is no national law prescribing the required stable funding for required reserves, an appropriate required stable funding factor, taking into account, in particular, the extent to which reserve requirements exist over a one-year horizon and therefore require associated stable funding.

Trade finance off-balance sheet related products as referred to in Annex I of the CRR with a residual maturity of less than one year shall be subject to a 2.5% required stable funding factor.

1.

The following assets and off-balance sheet items shall be subject to a 5% required stable funding factor:

1. (a) unencumbered shares or units in CIUs that are eligible for a 5% haircut for the calculation of the liquidity coverage ratio in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter;
2. (b) monies due from securities financing transactions with financial customers, where those transactions have a residual maturity of less than six months, other than those referred to in point (g) of Article 428r(1);
3. (c) the undrawn portion of committed credit and liquidity facilities pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
4. (d) trade finance off-balance sheet related products as referred to in Annex I of the CRR with a residual maturity of one year or more.

Institutions shall take the monies due referred to in point (b) of the first subparagraph of this paragraph into account on a net basis where Article 428e applies.

2.

Subject to Article 428da, for all netting sets of derivative contracts, institutions shall apply a 5% required stable funding factor to the absolute fair value of those netting sets of derivative contracts, gross of any collateral posted, where those netting sets have a negative fair value. For the purposes of this paragraph, institutions shall determine the fair value as gross of any collateral posted or settlement payments and receipts related to market valuation changes of such contracts.

Unencumbered assets that are eligible as level 1 extremely high quality covered bonds pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 7% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

Monies due from transactions with financial customers that have a residual maturity of less than six months other than those referred to in point (g) of Article 428r(1) and in point (b) of Article 428s(1) shall be subject to a 10% required stable funding factor.

Unencumbered shares or units in CIUs that are eligible for a 12% haircut for the calculation of the liquidity coverage ratio in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 12% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

Unencumbered assets that are eligible as level 2A assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 15% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

Unencumbered shares or units in CIUs that are eligible for a 20% haircut for the calculation of the liquidity coverage ratio in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 20% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

Unencumbered level 2B securitisations pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook and falling within Article 13(14)(a) of that Chapter shall be subject to a 25% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

The following assets shall be subject to a 30% required stable funding factor:

1. (a) unencumbered high quality covered bonds pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter;
2. (b) unencumbered shares or units in CIUs that are eligible for a 30% haircut for the calculation of the liquidity coverage ratio in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter;
3. (c) trade finance on-balance sheet related products with non-financial customers with a residual maturity of less than six months.

The following assets shall be subject to a 35% required stable funding factor:

1. (a) unencumbered level 2B securitisations pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook and falling within Article 13(14)(b) of that Chapter, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter;
2. (b) unencumbered shares or units in CIUs that are eligible for a 35% haircut for the calculation of the liquidity coverage ratio pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

Unencumbered shares or units in CIUs that are eligible for a 40% haircut for the calculation of the liquidity coverage ratio pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 40% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

The following assets shall be subject to a 50% required stable funding factor:

1. (a) unencumbered assets that are eligible as level 2B assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding level 2B securitisations and high quality covered bonds pursuant to that Chapter, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter. For these purposes Article 12(1)(c)(i) to (iii) of Chapter 2 of the Liquidity Coverage Ratio (CRR) Part shall be replaced with the following eligibility criteria:
1. (i) the shares form part of the Financial Times Stock Exchange 100 (FTSE 100) in the United Kingdom or a major stock index of a third country composed of leading companies in the relevant jurisdiction;
2. (ii) the shares are denominated in the domestic currency of the institution’s home jurisdiction or in the currency of the jurisdiction where the institution’s liquidity risk is taken; and
3. (iii) the shares have a proven record as a reliable source of liquidity in the markets (through repo or outright sale) even during stressed market conditions, i.e.:
1. — a maximum decline of price over a 30-day period not exceeding 40%; or
2. — an increase in haircut over a 30-day period not exceeding 40 percentage points,
3. during a relevant period of significant liquidity stress;
2. (b) deposits held by the institution in another financial institution that fulfil the criteria for operational deposits as set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
3. (c) monies due from transactions with a residual maturity of less than one year with:
1. (i) the central government of the United Kingdom or of a third country;
2. (ii) regional governments or local authorities in a third country;
3. (iii) public sector entities of the United Kingdom or of a third country;
4. (iv multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
5. (v) non-financial corporates, retail customers and SMEs, unless otherwise specified in Article 428aa(c);
6. (vi) credit unions authorised by the competent authority, personal investment companies and clients that are deposit brokers to the extent that those assets do not fall under point (b) of this paragraph;
4. (d) monies due from transactions with a residual maturity of at least six months but less than one year with:
1. (i) the Bank of England or the central bank of a third country;
2. (iii) financial customers;
5. (e) trade finance on-balance sheet related products with a residual maturity of at least six months but less than one year;
6. (f) assets encumbered for a residual maturity of at least six months but less than one year, except where those assets would be assigned a higher required stable funding factor in accordance with Articles 428ae to 428ah if they were held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;
7. (g) any other assets with a residual maturity of less than one year, unless otherwise specified in Articles 428r to 428ac.

Unencumbered shares or units in CIUs that are eligible for a 55% haircut for the calculation of the liquidity coverage ratio in accordance with Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 55% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

1.

The following assets shall be subject to a 65% required stable funding factor:

1. (a) unencumbered loans secured by mortgages on residential property with a residual maturity of one year or more, provided that those loans are assigned a risk weight of 35% or less in accordance with Chapter 2 of Title II of Part Three of the CRR;
2. (b) unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428ad, provided that those loans are assigned a risk weight of 35% or less in accordance with Chapter 2 of Title II of Part Three of the CRR.

2.

Institutions shall apply a 65% required stable funding factor to the most senior tranche or, if the institution has retained all tranches, all tranches of unencumbered securitisations:

1. (a) with a residual maturity of one year or more;
2. (b) where the underlying exposures were originated by:
1. (i) the institution;
2. (ii) a subsidiary of the institution; or
3. (iii) a third party provided the exposures were purchased by any of the entities in paragraph (2)(b)(i) to (ii) of this Article prior to the securitisation; and
3. (c) whose underlying exposures would be subject to paragraph 1(a) of this Article had the underlying exposures not been securitised.

The following assets and off-balance sheet items shall be subject to a 85% required stable funding factor:

1. (a) any assets and off-balance sheet items, including cash, posted as initial margin for derivative contracts, unless those assets would be assigned a higher required stable funding factor in accordance with Article 428ah if held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;
2. (b) any assets and off-balance sheet items, including cash, posted as contribution to the default fund of a CCP, unless those would be assigned a higher required stable funding factor in accordance with Article 428ah if held unencumbered, in which case the higher required stable funding factor to be applied to the unencumbered asset shall apply;
3. (c) unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428af, which are not past due for more than 90 days and which are assigned a risk weight of more than 35% in accordance with Chapter 2 of Title II of Part Three of the CRR;
4. (d) trade finance on-balance sheet related products with non-financial customers with a residual maturity of one year or more;
5. (e) unencumbered securities with a residual maturity of one year or more that are not in default in accordance with Article 178 and that are not eligible as liquid assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, unless otherwise specified in Article 428af(2);
6. (f) unencumbered exchange-traded equities that are not eligible as level 2B assets pursuant to Article 428ad(a);
7. (g) physically traded commodities, including gold but excluding commodity derivatives unless otherwise specified in Article 428f;
8. (h) assets encumbered for a residual maturity of one year or more in a cover pool funded by covered bonds as referred to in provisions implementing Article 52(4) of Directive 2009/65/EC or covered bonds which meet the eligibility requirements for the treatment as set out in Article 129(4) or (5) of the CRR.

1.

The following assets shall be subject to a 100% required stable funding factor:

1. (a) unless otherwise specified in this Chapter 4 of Title IV (The Net Stable Funding Ratio), any assets encumbered for a residual maturity of one year or more;
2. (b) any assets other than those referred to in Articles 428r to 428ag, including loans to financial customers having a residual contractual maturity of one year or more, non- performing exposures, items deducted from own funds, fixed assets, non-exchange-traded equities, retained interest, insurance assets, defaulted securities.

2.

Institutions shall apply a 100% required stable funding factor to the difference, if positive, between the sum of fair values across all netting sets with positive fair value and the sum of fair values across all netting sets with negative fair value calculated in accordance with Article 428d.

The following rules shall apply to the calculation referred to in the first subparagraph:

1. (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value, only up to the extent that it results in the netting set having zero fair value, where the collateral received as variation margin qualifies as a level 1 asset pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified in that Chapter, and where institutions are legally entitled and operationally able to reuse that collateral;
2. (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value, only up to the extent that it results in the netting set having zero fair value.

By way of derogation from Chapters 3 and 4 of Title IV (The Net Stable Funding Ratio), small and non-complex institutions may, subject to giving reasonable notice to the competent authority, calculate the ratio between an institution's available stable funding as referred to in Chapter 6 of Title IV (The Net Stable Funding Ratio), and the institution's required stable funding as referred to in Chapter 7 of Title IV (The Net Stable Funding Ratio), expressed as a percentage.

1.

Unless otherwise specified in this Chapter 6 of Title IV (The Net Stable Funding Ratio), the amount of available stable funding shall be calculated by multiplying the accounting value of various categories or types of liabilities and own funds by the available stable funding factors to be applied under Section 2. The total amount of available stable funding shall be the sum of the weighted amounts of liabilities and own funds.

2.

Bonds and other debt securities that are issued by the institution, sold exclusively in the retail market, and held in a retail account, may be treated as belonging to the appropriate retail deposit category. Limitations shall be in place, such that those instruments cannot be bought and held by parties other than retail customers.

1.

Unless otherwise specified in this Chapter 6 of Title IV (The Net Stable Funding Ratio), institutions shall take into account the residual contractual maturity of their liabilities and own funds to determine the available stable funding factors to be applied under Section 2.

2.

Institutions shall take into account existing options in determining the residual maturity of a liability or of own funds in a prudent manner. They shall do so on the assumption that the counterparty will redeem call options at the earliest possible date. For options exercisable at the discretion of the institution, the institution shall take into account reputational factors that may limit an institution's ability not to exercise the option, in particular market expectations that institutions should redeem certain liabilities before their maturity.

3.

Institutions shall treat deposits with fixed notice periods in accordance with their notice period, and shall treat term deposits in accordance with their residual maturity. By way of derogation from paragraph 2 of this Article, institutions shall not take into account options for early withdrawals where the depositor has to pay a material penalty for early withdrawals which occur in less than one year, such penalty being laid down in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, to determine the residual maturity of term retail deposits.

4.

In order to determine the available stable funding factors to be applied under Section 2, for liabilities with a residual contractual maturity of one year or more, any portion that matures in less than six months and any portion that matures between six months and less than one year, shall be treated as having a residual maturity of less than six months and between six months and less than one year, respectively.

1.

Unless otherwise specified in this Section, all liabilities without a stated maturity, including short positions and open maturity positions, shall be subject to a 0% available stable funding factor, with the exception of the following:

1. (a) deferred tax liabilities, which shall be treated in accordance with the nearest possible date on which such liabilities could be realised;
2. (b) minority interests, which shall be treated in accordance with the term of the instrument concerned.

2.

Deferred tax liabilities and minority interests as referred to in paragraph 1 shall be subject to one of the following factors:

1. (a) 0%, where the effective residual maturity of the deferred tax liability or minority interest is less than one year;
2. (b) 100%, where the effective residual maturity of the deferred tax liability or minority interest is one year or more.

3.

The following liabilities and capital items or instruments shall be subject to a 0% available stable funding factor:

1. (a) trade date payables arising from purchases of financial instruments, of foreign currencies and of commodities, that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or that have failed to settle but are nonetheless expected to settle;
2. (b) liabilities that are categorised as being interdependent with assets in accordance with Article 428f;
3. (c) liabilities with a residual maturity of less than one year provided by:
1. (i) the Bank of England;
2. (ii) the central bank of a third country;
3. (iii) financial customers;
4. (d) any other liabilities and capital items or instruments not referred to in this Article and Articles 428am to 428ap.

4.

Institutions shall apply a 0% available stable funding factor to the absolute value of the difference, if negative, between the sum of fair values across all netting sets with positive fair value and the sum of fair values across all netting sets with negative fair value calculated in accordance with Article 428d.

The following rules shall apply to the calculation referred to in the first subparagraph:

1. (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value, only up to the extent that it results in the netting set having zero fair value, where the collateral received as variation margin qualifies as a level 1 asset pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified in that Chapter, and where institutions are legally entitled and operationally able to reuse that collateral;
2. (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value, only up to the extent that it results in the netting set having zero fair value.

-

The following liabilities and capital items or instruments shall be subject to a 50% available stable funding factor:

1. (a) deposits received that fulfil the criteria for operational deposits set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook;
2. (b) liabilities and capital items or instruments with a residual maturity of less than one year provided by:
1. (i) the central government of the United Kingdom or of a third country;
2. (ii) regional governments or local authorities in the United Kingdom or in a third country;
3. (iii) public sector entities of the United Kingdom or of a third country;
4. (iv) multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
5. (v) non-financial corporate customers;
6. (vi) credit unions authorised by the competent authority, personal investment companies and clients that are deposit brokers, with the exception of deposits received, that fulfil the criteria for operational deposits as set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook.

-

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for other retail deposits set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 90% available stable funding factor.

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for stable retail deposits set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 95% available stable funding factor.

The following liabilities and capital items and instruments shall be subject to a 100% available stable funding factor:

1. (a) the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79;
2. (b) the Additional Tier 1 items of the institution before the deduction of the items referred to in Article 56 and before Article 79 has been applied thereto, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
3. (c) the Tier 2 items of the institution before the deductions referred to in Article 66 and before the application of Article 79, having a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
4. (d) any other capital instruments of the institution with a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
5. (e) any other secured and unsecured borrowings and liabilities with a residual maturity of one year or more, including term deposits, unless otherwise specified in Articles 428al to 428ao.

1.

Unless otherwise specified in this Chapter 7 of Title IV (The Net Stable Funding Ratio), for small and non-complex institutions the amount of required stable funding shall be calculated by multiplying the accounting value of various categories or types of assets and off-balance sheet items by the required stable funding factors to be applied in accordance with Section 2 of this Chapter. The total amount of required stable funding shall be the sum of the weighted amounts of assets and off-balance sheet items.

2.

Assets that institutions have borrowed or otherwise acquired in securities financing transactions shall be subject to the required stable funding factors to be applied under Section 2 of this Chapter where those assets are accounted for on the balance sheet of the institution or where the institution is exposed to all or substantially all of the economic risk and reward in respect of those assets. Otherwise, such assets shall be excluded from the calculation of the amount of required stable funding.

3.

Assets that institutions have lent or otherwise disposed of in securities financing transactions which the institution keeps on balance sheet or in respect of which the institution retains exposure to all or substantially all of the economic risk and reward, shall be considered as encumbered assets for the purposes of this Chapter 7 of Title IV (The Net Stable Funding Ratio) and shall be subject to required stable funding factors to be applied under Section 2. Otherwise, such assets shall be excluded from the calculation of the amount of required stable funding.

4.

Assets that are encumbered for a residual maturity of six months or longer shall be assigned either the required stable funding factor that would be applied under Section 2 to those assets if they were held unencumbered or the required stable funding factor that is otherwise applicable to those encumbered assets, whichever factor is higher. The same shall apply where the residual maturity of the encumbered assets is shorter than the residual maturity of the transaction that is the source of encumbrance.

Assets that have less than six months remaining in the encumbrance period shall be subject to the required stable funding factors to be applied under Section 2 to the same assets if they were held unencumbered.

5.

Where an institution reuses or repledges an asset that was borrowed, including in securities financing transactions, and that is accounted for off-balance sheet, the transaction through which that asset has been borrowed shall be treated as encumbered to the extent that the transaction cannot mature without the institution returning the asset borrowed.

6.

The following assets shall be considered to be unencumbered:

1. (a) assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded credit lines available to the institution;
2. (b) assets that the institution has received as collateral for credit risk mitigation purposes in secured lending, secured funding or collateral exchange transactions and that the institution may dispose of;
3. (c) assets attached as non-mandatory over-collateralisation to a covered bond issuance.

For the purposes of point (a) of the first subparagraph of this paragraph, institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification set out in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, starting with assets ineligible for the liquidity buffer.

8.

Institutions shall exclude assets associated with collateral recognised as variation margin posted in accordance with point (b) of Article 428al(4) and Article 428az(2) or as initial margin posted or as contribution to the default fund of a CCP in accordance with points (a) and (b) of Article 428ay from other parts of calculation of the amount of required stable funding in accordance with this Chapter 7 of Title IV (The Net Stable Funding Ratio) in order to avoid any double counting. This paragraph 8 does not apply to collateral assets associated with excess variation margin posted and not already recognised in point (b) of Article 428al(4) or Article 428az(2), which institutions shall take into account in other parts of the calculation of the amount of required stable funding in accordance with this Chapter 7 of Title IV (The Net Stable Funding Ratio).

9.

Institutions shall include in the calculation of the amount of required stable funding financial instruments, foreign currencies and commodities for which a purchase order has been executed. They shall exclude from the calculation of the amount of required stable funding financial instruments, foreign currencies and commodities for which a sale order has been executed, provided that those transactions are not reflected as derivatives or secured funding transactions on the institutions' balance sheet and that those transactions are to be reflected on the institutions' balance sheet when settled.

10.

Institutions shall apply appropriate stable funding factors to off-balance sheet exposures that are not referred to in this Chapter 7 of Title IV (The Net Stable Funding Ratio) to ensure that they hold an appropriate amount of available stable funding for the portion of those exposures that are expected to require funding over the one-year horizon of the net stable funding ratio. When considering those factors, institutions shall, in particular, take into account the material reputational damage to the institution that could result from not providing that funding.

1.

Unless otherwise specified in this Chapter 7 of Title IV (The Net Stable Funding Ratio), institutions shall take into account the residual contractual maturity of their assets and off-balance sheet transactions when determining the required stable funding factors to be applied to their assets and off-balance sheet items under Section 2.

2.

Institutions shall treat assets that have been segregated in accordance with Article 11(3) of Regulation (EU) No 648/2012 in accordance with the underlying exposure of those assets. Institutions shall, however, subject those assets to higher required stable funding factors, based on the term of encumbrance of those assets. For these purposes, segregated assets are encumbered when the institution is not able freely to dispose of or exchange such assets. Institutions shall consider the term of encumbrance to be the same as the term of the liabilities which generated the segregation requirement.

3.

When calculating the residual maturity of an asset, institutions shall take options into account in a prudent manner. Institutions shall assume that the issuer or counterparty will exercise any option to extend the maturity of an asset. For options that are exercisable at the discretion of the institution, the institution shall take into account reputational factors that may limit the institution's ability not to exercise the option, in particular markets' and clients' expectations that the institution should extend the maturity of certain assets at their maturity date.

4.

In order to determine the required stable funding factors to be applied in accordance with Section 2, for amortising loans with a residual contractual maturity of one year or more, the portions that mature in less than six months and between six months and less than one year shall be treated as having a residual maturity of less than six months and between six months and less than one year respectively.

1.

The following assets shall be subject to a 0% required stable funding factor:

1. (a) unencumbered assets that are eligible as level 1 high quality liquid assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified in that Chapter, regardless of whether they comply with the operational requirements as set out in that Chapter;
2. (b) all reserves held by the institution in the Bank of England or the central bank of a third country, including required reserves and excess reserves;
3. (c) all claims on the Bank of England or the central bank of a third country that have a residual maturity of less than six months;
4. (d) assets that are categorised as being interdependent with liabilities in accordance with Article 428f.

2.

By way of derogation from point (b) of paragraph 1, institutions shall apply a higher required stable funding factor to required reserves which shall be:

1. (a) the required stable funding factor for required reserves that is prescribed by the national law of the third country in which the relevant central bank is located; or
2. (b) if there is no national law prescribing the required stable funding for required reserves, an appropriate required stable funding factor, taking into account, in particular, the extent to which reserve requirements exist over a one-year horizon and therefore require associated stable funding.

Trade finance off-balance sheet related products as referred to in Annex I of the CRR with a residual maturity of less than one year shall be subject to a 2.5% required stable funding factor.

1.

The undrawn portion of committed credit and liquidity facilities specified in Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 5% required stable funding factor.

2.

Subject to Article 428da, for all netting sets of derivative contracts, institutions shall apply a 5% required stable funding factor to the absolute fair value of those netting sets of derivative contracts, gross of any collateral posted, where those netting sets have a negative fair value. For the purposes of this paragraph, institutions shall determine the fair value as gross of any collateral posted or settlement payments and receipts related to market valuation changes of such contracts.

3.

Trade finance off-balance sheet related products as referred to in Annex I of the CRR with a residual maturity of one year or more shall be subject to a 5% required stable funding factor.

Unencumbered assets that are eligible as level 1 extremely high quality covered bonds pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook shall be subject to a 10% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

Unencumbered assets that are eligible as level 2A assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, and unencumbered shares or units in CIUs pursuant to that Chapter shall be subject to a 20% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter.

The following assets shall be subject to a 50% required stable funding factor:

1. (a) secured and unsecured loans with a residual maturity of less than one year and provided that they are encumbered less than one year;
2. (b) any other assets with a residual maturity of less than one year, unless otherwise specified in Articles 428as to 428av;
3. (c) assets encumbered for a residual maturity of at least six months but less than one year, except where those assets would be assigned a higher required stable funding factor in accordance with Articles 428ax, 428 axa, 428ay and 428az if they were held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply.

Assets that are eligible as level 2B assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, and shares or units in CIUs pursuant to that Chapter shall be subject to a 55% required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that Chapter, provided that they are encumbered less than one year. For these purposes Article 12(1)(c)(i) to (iii) of Chapter 2 of the Liquidity Coverage Ratio (CRR) Part shall be replaced with the following eligibility criteria:

1. (a) the shares form part of the Financial Times Stock Exchange 100 (FTSE 100) in the United Kingdom or a major stock index of a third country composed of leading companies in the relevant jurisdiction;
2. (b) the shares are denominated in the domestic currency of the institution’s home jurisdiction or in the currency of the jurisdiction where the institution’s liquidity risk is taken; and
3. (c) the shares have a proven record as a reliable source of liquidity in the markets (through repo or outright sale) even during stressed market conditions, i.e.:
1. (i) a maximum decline of price over a 30-day period not exceeding 40%; or
2. (ii) an increase in haircut over a 30-day period not exceeding 40 percentage points,
4. during a relevant period of significant liquidity stress.

1.

Unencumbered loans secured by mortgages on residential property with a residual maturity of one year or more, provided that those loans are assigned a risk weight of 35% or less in accordance with Chapter 2 of Title II of Part Three of the CRR, shall be subject to a 65% required stable funding factor.

2.

Institutions shall apply a 65% required stable funding factor to the most senior tranche or, if the institution has retained all tranches, all tranches of unencumbered securitisations:

1. (a) with a residual maturity of one year or more;
2. (b) where the underlying exposures were originated by:
1. (i) the institution;
2. (ii) a subsidiary of the institution; or
3. (iii) a third party provided the exposures were purchased by any of the entities in paragraph (2)(b)(i) to (ii) of this Article prior to the securitisation; and
3. (c) whose underlying exposures would be subject to paragraph 1 of this Article had the underlying exposures not been securitised.

The following assets and off-balance sheet items shall be subject to a 85% required stable funding factor:

1. (a) any assets and off-balance sheet items, including cash, posted as initial margin for derivative contracts or posted as contribution to the default fund of a CCP, unless those assets would be assigned a higher required stable funding factor in accordance with Article 428az if held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;
2. (b) unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers, which are not past due for more than 90 days, unless otherwise specified in Article 428axa(1);
3. (c) trade finance on-balance sheet related products with non-financial customers with a residual maturity of one year or more;
4. (d) unencumbered securities with a residual maturity of one year or more that are not in default in accordance with Article 178 and that are not eligible as liquid assets pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, unless otherwise specified in Article 428axa(2);
5. (e) unencumbered exchange-traded equities that are not eligible as level 2B assets pursuant to Article 428ax;
6. (f) physically traded commodities, including gold but excluding commodity derivatives, unless otherwise specified in Article 428f;
7. (g) unencumbered loans secured by mortgages on residential property with a residual maturity of one year or more, provided that those loans are assigned a risk weight of more than 35% in accordance with Chapter 2 of Title II of Part Three of the CRR.

1.

The following assets shall be subject to a 100% required stable funding factor:

1. (a) any assets encumbered for a residual maturity of one year or more;
2. (b) any assets other than those referred to in Articles 428as to 428ay, including loans to financial customers having a residual contractual maturity of one year or more, non- performing exposures, items deducted from own funds, fixed assets, non-exchange traded equities, retained interest, insurance assets, defaulted securities.

2.

Institutions shall apply a 100% required stable funding factor to the difference, if positive, between the sum of fair values across all netting sets with positive fair value and the sum of fair values across all netting sets with negative fair value calculated in accordance with Article 428d.

The following rules shall apply to the calculation referred to in the first subparagraph:

1. (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value, only up to the extent that it results in the netting set having zero fair value, where the collateral received as variation margin qualifies as a level 1 asset pursuant to Chapter 2 of the Liquidity Coverage Ratio (CRR) Part of the PRA Rulebook, excluding extremely high quality covered bonds specified in that Chapter, and where institutions are legally entitled and operationally able to reuse that collateral;
2. (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value, only up to the extent that it results in the netting set having zero fair value.