Bank of Zambia Banking and Financial Services (Liquidity Coverage Ratio) Directives, 2026

# OFFICE OF THE DEPUTY GOVERNOR - OPERATIONS

BOZ/EXEC/DGO/prs/bp

May 13, 2026

CB Circular No. : 05/2026

To : All Heads of Commercial Bank

## ISSUANCE OF THE BANKING AND FINANCIAL SERVICES (LIQUIDITY COVERAGE RATIO) DIRECTIVES, 2026

The Bank of Zambia hereby informs all commercial banks that the Banking and Financial Services (Liquidity Coverage Ratio (LCR)) Directives, 2026, were issued on April 17, 2026. The Directives are intended to strengthen the capacity of banks to withstand short-term liquidity stress, reinforcing confidence in the banking sector, and supporting overall financial system stability. In this regard, the Directives require banks to maintain an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted readily into cash to meet liquidity needs during a 30-day stress scenario.

Accordingly, banks are required to maintain, on an ongoing basis, an LCR of not less than 20 percent, measured as the ratio of unencumbered HQLA to total net cash outflows over a 30-day stress period. To facilitate a smooth transition, the LCR shall be implemented in a phased manner, as follows:

i. An initial minimum requirement of 20 percent; and  
ii. Annual incremental increase of 20 percentage points until the minimum requirement of 100 percent is reached by 2030.

Banks are, therefore, expected to integrate the LCR requirements into their liquidity risk management frameworks, governance arrangements, internal control systems, and contingency funding plans. Monthly LCR returns shall be submitted in accordance with the LCR Directives, 2026, commencing July 1, 2026. Banks are further expected to ensure that all submissions are accurate, complete, and timely, as these returns will form an important part of the Bank of Zambia’s ongoing supervisory assessment of liquidity risk. The Directives shall take effect from July 1, 2026, and all banks are required to undertake the necessary operational, systems, and governance enhancements to achieve full compliance within the prescribed implementation timeline.

In addition, please note that the banks shall continue submitting the net stable funding ratio quarterly quantitative impact studies returns until further notice.

Any queries or requests for clarification regarding the Directives or the related reporting requirements should be directed to the Prudential Supervision Department.

Francis Chipimo (PhD)  
DEPUTY GOVERNOR – OPERATIONS

cc Governor  
Director – Prudential Supervision

Bank Square, Cairo Road, P.O. Box 30080, Lusaka, Zambia Tel:+260-211-399303, 399300, E-mail: dgo@boz.zm. Web: http://www.boz.zm

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# REPUBLIC OF ZAMBIA  
## GOVERNMENT GAZETTE  

Published by Authority  
Price: K35.00 net  
Annual Subscription: K900.00  

No. 7906] Lusaka, Friday, 17th April, 2026 [Vol. LXII, No. 45  

GAZETTE NOTICE NO. 663 OF 2026  
[2767072  

The Banking and Financial Services Act, 2017  
(Act No. 7 of 2017)  

The Banking and Financial Services (Liquidity Coverage Ratio) Directives, 2026  

IN EXERCISE of the powers contained in Section Fifty-Seven and Section One Hundred and Sixty-Seven of the Banking and Financial Services Act, 2017, the following Directives are hereby issued:  

### ARRANGEMENT OF SECTIONS  

**PART I**  
PRELIMINARY  

1. Short Title  
2. Interpretation  
3. Application  

**PART II**  
OBJECTIVES OF THE DIRECTIVES  

4. Purpose  

**PART III**  
DETERMINATION OF LIQUIDITY COVERAGE RATIO  

5. Liquidity Coverage Ratio  
6. Currencies  
7. Frequency of Calculation and Reporting  
8. Computation of Liquidity Coverage Ratio  
9. Operational Requirements  
10. Categories of High-Quality Liquid Assets  
11. Total Net Cash Outflows  

**PART IV**  
GENERAL PROVISIONS  

12. Commencement  

### PART I  
PRELIMINARY  

**1. Short Title**  
These Directives may be cited as the Banking and Financial Services (Liquidity Coverage Ratio) Directives, 2026.  

**2. Interpretation**  
In these Directives, unless the context otherwise requires:  
- ‘Bank’ has the meaning assigned to the term in the Banking and Financial Services Act, 2017.  
- ‘bank’ has the meaning assigned to the term in the Banking and Financial Services Act, 2017.  
- ‘Bank eligibility’ means an asset accepted by the Bank usually in repo operations and qualify as an HQLA subject to haircuts set by the Bank.  

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# Zambia Gazette  
## 17th April, 2026  
### 290  

- ‘High-quality liquid assets (HQLA)’ means assets that can be easily and immediately converted into cash at little or no loss of value.  
- ‘Intraday liquidity’ means funds which can be accessed by a financial service provider during the business day.  
- ‘Micro, small- and medium-sized enterprise (MSME)’ has the meaning assigned to the term in the Banking and Financial Services (Computation of Credit Risk Weighted Assets) Directives, 2025.  
- ‘Unencumbered’ means free of legal, regulatory, contractual, or other restrictions on the ability of a bank to liquidate, sell, transfer, or assign the asset.  
- ‘Retail deposits’ means deposits placed with a bank by a natural person.  
- ‘Significant currency’ means any currency in which a bank’s aggregate liabilities constitute 5 percent or more of its total liabilities.  

**3. Application**  
These Directives shall apply to banks.  

### PART II  
OBJECTIVES OF THE DIRECTIVES  

**4. Purpose**  
The purpose of these Directives is to prescribe minimum liquidity requirement in relation to the Liquidity Coverage Ratio (LCR) for a bank. The Directives set the minimum level of unencumbered stock of HQLA which a bank shall maintain to meet its liquidity needs for a 30-day liquidity stress scenario.  

### PART III  
DETERMINATION OF LIQUIDITY COVERAGE RATIO  

**5. Liquidity Coverage Ratio**  
The LCR is a key component of the Bank’s supervisory approach to the management of liquidity risk and is supplemented by the Risk Management Guidelines issued by the Bank. The Bank may require a bank to adopt more stringent requirements or parameters to reflect its liquidity risk profile, risk management and control practices. These Directives aim to ensure that a bank has an adequate stock of HQLA to survive a stressed funding scenario lasting 30 days.  

**6. Currencies**  
6.1. A bank shall meet the required LCR and shall report the consolidated LCR in Zambian Kwacha. Additionally, a bank shall hold stock of HQLA to generate liquidity in the currency in which the net cash outflows arise. A bank shall have policies and limits in place to avoid concentration with respect to asset types, issue and issuer types, and currency (consistent with the distribution of net cash outflows by currency) within asset classes.  
6.2. A bank shall measure, monitor and report the LCR in significant currencies to track potential currency mismatch issues that could arise in a time of stress.  
6.3. In managing foreign exchange liquidity risk, a bank shall consider the risk that its ability to swap currencies and access the relevant foreign exchange markets may erode rapidly under stressed conditions. A bank shall incorporate in its liquidity risk management policy and strategy, measures to manage sudden adverse exchange rate movements that could sharply widen existing mismatched positions and alter the effectiveness of any foreign exchange hedges in place.  

**7. Frequency of Calculation and Reporting**  
7.1. A bank shall compute and comply with the required LCR and maintain records on a daily basis.  
7.2. A bank shall report the required LCR on a monthly basis and must have the operational capability to increase the frequency of reporting in stressed situations.  
7.3. A bank shall notify the Bank if its LCR has fallen, or is expected to fall, below the prescribed thresholds at each point in time. In such circumstances, a bank shall provide an explanation or the reason(s) for the LCR falling below the required threshold.  
7.4. A bank shall, where the LCR remains below the required threshold, indicate the expected timeframe and measures that have been or will be taken to restore the LCR within the required threshold.  

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# Zambia Gazette  
## 17th April, 2026  
### 291  

**8. Computation of the Liquidity Coverage Ratio**  
8.1. The LCR shall be computed as follows:  

**Table 1: Formula for Computation of LCR**  

| Stock of HQLA |
|---------------|
| Total net cash outflows over the next 30 days |

8.2. A bank shall, at all times, maintain a stock of unencumbered HQLA sufficient to cover its total net cash outflows over a 30-day period under the prescribed stress scenario. The value of such HQLA shall be no less than the minimum requirement, as determined in accordance with these Directives.  
8.3. The stress test scenario for the LCR shall be based on a combined idiosyncratic and market-wide shock which takes place over a 30-day horizon.  
8.4. A bank shall conduct stress tests, at least monthly, to assess the level of liquidity it shall hold beyond the LCR stress test scenario, which shall incorporate longer time horizons.  
8.5. Bank eligibility constitutes a basis for the categorisation of an asset as HQLA.  
8.6. To qualify as HQLA, an asset shall generally be assessed against both fundamental characteristics and market-related characteristics, as outlined below:  

**(a) Fundamental Characteristics**  
i. Have low risk. Characteristics include high credit standing of the issuer and a low degree of subordination; low sensitivity to changes in interest rates; low legal risk; low inflation risk; and where denomination is in a convertible currency, have a low foreign exchange risk.  
ii. Have ease and certainty of evaluation. Characteristics include having a standardised, homogenous, and simple structure.  
iii. Have low correlation with risky assets. Characteristics include not being subject to wrong-way risk.  
iv. Listed. Be listed on a securities exchange as the Bank may determine, whether within, or outside, the Republic of Zambia.  
v. Liquidity. Be liquid in markets during a time of stress.  
vi. Easily convertible. Be easily and immediately converted into cash at little or no loss of value.  

**(b) Market-Related Characteristics**  
i. Be sizable and have active outright sale or repurchase agreement (repo) markets at all times.  
ii. Have low volatility and have a lower probability of triggering forced sales to meet liquidity requirements.  
iii. Have flight to quality characteristics, in that the market has shown tendencies to move into these types of assets in a systemic crisis.  

8.7. The Bank assesses the eligibility of any assets for inclusion in the stock of HQLA on the basis of the fundamental and market-related characteristics, as well as the capacity of such assets to fulfil certain operational requirements.  

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# Zambia Gazette  
## 17th April, 2026  
### 292  

**9. Operational Requirements**  
All assets in the stock of HQLA shall be subject to the following operational requirements:  

9.1. A bank shall manage the stock of HQLA in such a manner that it allows the bank to:  
(a) immediately use the stock of assets as a source of contingent funds, demonstrating the ability to convert such assets into cash through outright sale or repo.  
(b) fill the funding gaps between cash inflows and outflows at any time during the 30-day stress period, with no restriction on the use of the liquidity generated.  

9.2. A bank shall not include encumbered assets in the computation of HQLA. Assets received in reverse repo and securities financing transactions that are held at the bank, have not been rehypothecated, and are legally and contractually available for the bank’s use can be considered as part of the stock of HQLA.  

9.3. A bank shall exclude from the stock of HQLA, assets that, although meeting the definition of “unencumbered”, a bank would not have the operational capability to monetise the asset in order to meet outflows during the stress period.  

9.4. A bank shall have operational capability to monetise assets and establish procedures and appropriate systems, including providing the function identified in Directive 9.6, with access to all necessary information to execute monetisation of any asset at any time.  

9.5. A bank shall ensure that the monetisation of the asset is executable, from an operational perspective, in the standard settlement period for the asset class in the relevant jurisdiction.  

9.6. A bank shall ensure that the stock of HQLA is under the control of the function charged with managing the liquidity of a bank, and the function should have continuous authority, and legal and operational capability, to monetise any asset in the stock.  

9.7. A bank shall put in place a policy or framework that identifies legal entities, geographical locations, currencies and specific custodial or bank accounts where HQLA are held. In addition, a bank shall determine whether any such assets should be excluded for operational reasons and therefore have the ability to determine the composition of its stock on a daily basis.  

9.8. A bank may include in the stock of HQLA, assets received as collateral for derivatives transactions that are not segregated and are legally able to be rehypothecated, provided that the bank records an appropriate level of derivative cash outflows and reports to the Bank accordingly.  

9.9. Where an eligible liquid asset becomes ineligible, a bank shall be permitted to keep such assets in its stock of liquid assets for an additional 30 days, to allow the bank additional time to adjust its stock as needed or replace the asset, to mitigate cliff effects.  

**10. Categories of HQLA**  
10.1. The total stock of HQLA shall fall in one of two Levels of assets:  
(a) Level 1 assets shall comprise an unlimited share of the pool and are not subjected to a haircut under the LCR unless specified by the Bank as indicated in Part One of Schedule I. Bonds and bills issued by the Republic of Zambia qualify as level 1 assets. This only applies to bonds and bills issued by the Government of the Republic of Zambia and denominated in Zambian Kwacha.  
(b) Level 2 assets (comprising Level 2A assets and any Level 2B assets permitted by the Bank) can be included in the stock of HQLA, subject to the requirement that they comprise no more than 40 percent of the overall stock after haircuts have been applied. The 40 percent cap on Level 2 assets should be determined after the application of required haircuts, and if applicable, after taking into account the unwinding of short-term securities financing transactions and collateral swap transactions maturing within 30 days that involve the exchange of HQLA.  
i. Level 2A haircuts are indicated in Part Two of Schedule I.  
ii. Level 2B assets can only comprise up to 15 percent of the total stock of HQLA after haircuts have been applied as indicated in Part Two of Schedule I. A bank shall put in place appropriate systems and measures to monitor and control the potential risks that a bank may be exposed to in holding these assets.  

10.2. Assets to be included in each category are those that a bank is holding on the first day of the stress period, irrespective of their residual maturity.  

**11. Total Net Cash Outflows**  
11.1. A bank shall compute total net cash outflows as the difference between total expected cash outflows and total expected cash inflows in the stress scenario for the subsequent 30 days. Where applicable, the calculation shall include interest that is expected to be received and paid during the 30-day time horizon.  

**Table 2 Computation of Total Net Cash Outflows**  
Total net cash outflows over the next 30 days = Total expected cash outflows – Total Expected cash inflows (Capped at 75 percent of total expected cash outflows)  

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# Zambia Gazette  
## 17th April, 2026  
### 293  

11.2. A bank shall compute total expected cash outflows by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down.  
11.3. All deposits insured by the Zambia Deposit Insurance Scheme shall be deemed as deposits insured by an effective deposit protection scheme.  
11.4. A bank shall calculate total expected cash inflows by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in under the scenario up to an aggregate cap of 75 percent of total expected cash outflows.  
11.5. A bank shall not be allowed to double count items when calculating the LCR. If an asset is included as part of the stock of HQLA, the asset and associated cash inflows must not also be counted as cash inflows in the denominator.  
11.6. In calculating cash outflows and inflows with uncertain maturities, a bank shall make the most conservative assumptions for determining the maturity or transaction date for an instrument or transaction.  

### PART IV  
GENERAL PROVISIONS  

**12. Commencement**  
12.1. These Directives shall come into force on 1st July, 2026.  
12.2. The LCR shall be implemented in a phased manner. The LCR requirement shall become effective on the day that the Directives come into force, whereby the minimum requirement will be set at 20 percent and adjusted upwards by 20 percent annually as follows:  

**Table 3: Transition Arrangement for LCR Implementation**  

| Year | 2026 | 2027 | 2028 | 2029 | 2030 |  
|------|------|------|------|------|------|  
| Minimum LCR | 20.0% | 40.0% | 60.0% | 80.0% | 100.0% |  

12.3. The required LCR may be revised by the Bank through Circular.  

## SCHEDULE I: COMPOSITION OF HQLA - LEVEL 1 AND LEVEL 2 ASSETS AND PRESCRIBED HAIRCUTS  

### Part One: Stock of HQLA – Level 1 Assets  

| Category | Factor |  
|----------|--------|  
| Level 1 assets in the stock of HQLA | Percentages are factors to be multiplied by the total amount of each item |  
| Level 1 assets can comprise an unlimited share of the pool and are not subject to a haircut under the LCR unless specified by the Bank. | 100 percent |  
| • Cash which includes coins and banknotes currently held by the bank; <br> • Statutory reserves; and <br> • Marketable securities representing claims on or guaranteed by sovereigns, central banks, Public Sector Entities (PSEs), the Bank for International Settlements, the International Monetary Fund, or multilateral development banks, and satisfying all of the following conditions: <br> (a) assigned a 0 percent risk-weight under the Banking and Financial Services (Capital Adequacy) Rules, 2025; <br> (b) have a proven record as a reliable source of liquidity in the markets, for repo or sale, even during stressed market conditions; and <br> (c) is not an obligation of a bank or any of its affiliated entities. | |  

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# Zambia Gazette  
## 17th April, 2026  
### 294  

### Part Two: Stock of HQLA – Level 2 Assets  

| Category | Factor |  
|----------|--------|  
| Level 2 assets in the stock of HQLA | percentages are factors to be multiplied by the to amount of each item |  
| Level 2 assets may account for a maximum of 40 percent of the total HQLA composition. | |  
| 1. A 15 percent haircut is applied to the current market value of each Level 2A asset held in the stock of HQLA. Level 2A assets are limited to the following: <br> • Marketable securities representing claims on or guaranteed by sovereigns, central banks, PSEs or multilateral development banks that satisfy all of the following conditions: <br> (a) assigned a 20 percent risk weight under the Banking and Financial Services (Capital Adequacy) Rules, 2025; <br> (b) have a proven record as a reliable source of liquidity in the markets, for repo or sale, even during stressed market conditions; and <br> (c) is not an obligation of a bank or any of its affiliated entities. | 85 percent |  
| 2. Level 2B assets can only comprise up to 15 percent of the total stock of HQLA. A 50 percent haircut is applied to the current market value of each Level 2B asset held in the stock of HQLA. Any bank intending to hold Level 2B assets shall seek the opinion of the Bank as to whether or not these instruments qualify as HQLA. Level 2B assets are limited to the following: <br> (a) Residential mortgage-backed securities. <br> (b) Corporate debt securities (including commercial paper). <br> (c) Common equity shares. | 50 percent |