Regulatory Alerts2022-12-15
National Discretion Related to the Liquidity Coverage Ratio
The Prudential Authority of the South African Reserve Bank has issued Directive D11/2022 to replace prior regulations and establish national discretion rules for calculating the Liquidity Coverage Ratio across banks, foreign branches, and controlling companies. The directive mandates that statutory and excess cash reserves qualify as Level 1 high-quality liquid assets without haircuts, permits foreign-currency assets to cover domestic outflows until December 2023 with an eight percent haircut, and specifies precise run-off factors for retail deposits, contingent funding obligations, and trade finance instruments. Banks must apply these standardized parameters, including limits for Level 2B equities and currency mismatch management, while the Prudential Authority retains the authority to reassess or revise any factor as market conditions evolve.