Page 43 - Banking Finance December 2020

ARTICLE

8. Assets assigned a 100% RSF factor comprise: may take into account reputational factors that may limit a
(a) all assets that are encumbered for a period of one year bank's ability not to exercise the option and prescribe higher
or more; RSF Factor. In particular, where the market expects certain

(b) NSFR derivative assets net of NSFR derivative liabilities, assets to be extended in their maturity, banks should assume
such behavior for the purpose of the NSFR and include these
if NSFR derivative assets are greater than NSFR
assets in the corresponding RSF category. If there is a
derivative liabilities;
contractual provision with a review date to determine
(c) all other assets not included in the above categories,
whether a given facility or loan is renewed or not, RBI may
including non-performing loans, loans to financial
authorize banks on a case by case basis, to use the next
institutions with a residual maturity of one year or more, review date as the maturity date.
non-exchange- traded equities, fixed assets, items
deducted from regulatory capital, retained interest, For purposes of determining its required stable
insurance assets, subsidiary interests and defaulted
funding, an institution should
securities; and
1) include financial instruments, foreign currencies and
(d) 5% of derivative liabilities (i.e. negative replacement commodities for which a purchase order has been
cost amount) (before deducting variation margin executed, and
posted).
2) exclude financial instruments, foreign currencies and
(e) All 'standard' restructured loans which attract higher commodities for which a sales order has been executed,
risk and/or additional provisioning. even if such transactions have not been reflected in the
9. RSF - Other Requirements balance sheet under a settlement-date accounting
The RSF factors assigned to various types of assets are model, provided that (i) such transactions are not
intended to approximate the amount of a particular asset reflected as derivatives or secured financing
that would have to be funded, either because it will be rolled transactions in the institution's balance sheet, and (ii)
over, or because it would not be monetized through sale or the effects of such transactions will be reflected in the
used as collateral in a secured borrowing transaction over institution's balance sheet when settled.
the course of one year without significant expense. Under C. Off balance Sheet Items which require stable
the standard, such amounts are expected to be supported Funding
by stable funding.
1. OBS exposure assigned 5% of RSF- Currently undrawn
portion
Assets should be allocated to the appropriate RSF factor
O Irrevocable and conditionally revocable credit and
based on their residual maturity or liquidity value. When liquidity facilities to any client
determining the maturity of an instrument, investors should
be assumed to exercise any option to extend maturity. For O Other contingent funding obligations, including
assets with options exercisable at the bank's discretion, RBI products and instruments
O Unconditionally revocable credit and liquidity
facilities
2. Non OBS exposure assigned 3% of RSF of the
currently undrawn portion
O contractual obligations such as:
potential requests for debt repurchases of the
bank's own debt or that of related conduits,
securities investment vehicles and other such
financing facilities
structured products where customers
anticipate ready marketability, such as
adjustable rate notes and variable rate demand
notes (VRDNs)

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