The LCR counts Level 1 assets at 100%, Level 2A at 85%, and Level 2B at 50% to 75%. Cash and banknotes are Level 1. Deposits at central banks and similar institutions are Level 1 if the bank can either withdraw them at any time under the contract or can take term borrowing from the central bank up to that amount1.

Consider a hypothetical example with Level 1 assets of 21.5 billion yen and Level 2A assets with a market value of 10 billion yen. The counted amounts are 21.5 billion yen and 8.5 billion yen, 30 billion yen in total.

Assets actually in use as collateral do not meet the notice's operational requirements and cannot be counted. Assets received as collateral for derivatives cannot be counted either unless they meet requirements such as not being held separately from the bank's other assets2.

Notes

  1. Article 9, paragraph 1, Article 10, paragraph 1, and Article 11, paragraph 1, of the Liquidity Notice (a Financial Services Agency notice). Page 7 of the Financial Services Agency's "バーゼル規制の概要" (in Japanese) divides eligible liquid assets for the LCR into Level 1, 2A, and 2B. ↩

  2. Article 15, items 1 and 4, of the Liquidity Notice (a Financial Services Agency notice). ↩