Regulatory Alerts2016-05-31
Circular 5/2016: Matters of Interpretation Relating to the Liquidity Coverage Ratio
The South African Reserve Bank’s Office of the Registrar of Banks issued Circular 5/2016 to clarify the interpretation and application of the Liquidity Coverage Ratio (LCR) for regulated banks and institutions. The circular specifies that foreign-currency high-quality liquid assets may cover up to five percent of domestic requirements subject to an eight percent haircut, mandates monthly monitoring of currency fungibility frameworks for consolidated reporting, and restricts cross-jurisdictional HQLA aggregation to 100 percent of minimum LCR requirements during the phase-in period. It also confirms that daily LCR reporting discrepancies are acceptable if immaterial, excludes operating costs from LCR outflows, requires quarterly re-evaluation of SME deposit thresholds, and temporarily excludes the Net Stable Funding Ratio from regulatory audits until a final directive is published.