Business, 02.11.2020 17:10 ira51

Central Bank has the following balance sheet (in millions of dollars). Assets Liquidity Level Liabilities and Equity Run-off factor Cash $ 15 Level 1 Stable retail deposits $ 190 3% Deposits at the Fed 30 Level 1 Less stable retail deposits 70 10% Treasury bonds 145 Level 1 CDs maturing in 6 months 100 0% Qualifying marketable securities 50 Level 1 Unsecured wholesale funding from: GNMA bonds 60 Level 2A Stable small business deposits 125 5% Loans to AA- corporations 540 Level 2A Less stable small business deposits 100 10% Mortgages 285 Nonfinancial corporates 450 75% Premises 40 Equity 130 Total $1,165 Total $1,165 Cash inflows over the next 30 days from the bank’s performing assets are $7.5 million. Calculate the LCR for Central Bank.

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Answer from: quantamagic

Central Bank

Computation of the LCR for Central Bank:

The LCR = 23%

Explanation:

Data and Calculations:

Central Bank balance sheet (in millions of dollars)

Assets Liabilities and Equity

Level 1

Cash $15 Stable retail deposits $ 190

Deposits at the Fed 30 Less stable retail deposits 70

Treasury bonds 145 CDs maturing in 6 months 100

Level 2A:

Qualifying marketable securities 50 Unsecured wholesale funding from:

GNMA bonds 60 Stable small biz deposits 125

Loans to AA-rated corporations 540 Less-stable biz deposits 100

Mortgages 285 Non-financial corporates 450

Premises 40 Equity 130

Total $1,165 Total $1,165

Cash inflows over the next 30 days from the bank's performing assets are $7.5 million. Calculate the LCR for Central Bank.

High Quality Liquid Assets:

Cash $15

Deposits at the Fed 30

Treasury bonds 145

Qualifying marketable securities 50

Total HQLA $240

Outflows:

Stable retail deposits $ 190

Less stable retail deposits 70

CDs maturing in 6 months 100

Stable small biz deposits 125

Less-stable biz deposits 100

Non-financial corporates 450

Total outflows $1,035

Cash inflows ($7.5)

Total cash flows $1,027.5

LCR = High Quality Liquid Assets/Total Cash flows

= $240/$1,027.5 = 0.23

b) The LCR is calculated by dividing the central bank's high-quality liquid assets by its total net cash flows over a 30-day stress period. The central bank's high-quality liquid assets include only those with a high potential to be converted easily and quickly into cash and can be categorized into three of level 1, level 2A, and level 2B.

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