DBFIA Practice Direction No. 9 (July 2024)

DBFIA Practice Direction No. 9 Page 1 of 2 DOMESTIC BANKS AND FINANCIAL INSTITUTIONS ACT DBFIA Practice Direction No. 9 Liquidity Coverage Ratio and Net Stable Funding Ratio Authority This Practice Direction is made in exercise of the powers conferred on the Central Bank of Belize (Central Bank) by Section 9 of the Domestic Banks and Financial Institutions Act (DBFIA), Revised Edition 2020 and shall come into effect on 28 June 2024. Summary The Central Bank seeks to strengthen the liquidity framework of domestic banks by adopting the Basel Committee of Banking Supervision’s Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) as standards for the measurement of liquidity. The LCR aims to promote short-term resilience of a bank's liquidity risk profile by ensuring that it has sufficient high quality liquid assets to survive a 30-calendar day stress scenario. The NSFR aims to reduce funding risk over a longer time horizon than the LCR by requiring banks to fund their activities with sufficiently stable sources of funding to mitigate the risk of future funding stress. This DBFIA Practice Direction specifies the minimum requirements for the LCR and NSFR ratios that are applicable to all domestic banks licensed under the DBFIA. These requirements are in addition to the liquid asset requirements established by Section 40 of the DBFIA. A. Minimum Requirements The Central Bank requires all domestic banks to maintain LCR and NSFR ratios, at all times, of at least 100%. The components of the LCR and NSFR are expressed as follows: i. Liquidity Coverage Ratio = 𝑆𝑡𝑜𝑐𝑘 𝑜𝑓 𝐻𝑖𝑔ℎ 𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑇𝑜𝑡𝑎𝑙 𝑁𝑒𝑡 𝐶𝑎𝑠ℎ 𝑂𝑢𝑡𝑓𝑙𝑜𝑤𝑠 𝑜𝑣𝑒𝑟 𝑡ℎ𝑒 𝑛𝑒𝑥𝑡 30 𝑐𝑎𝑙𝑒𝑛𝑑𝑎𝑟 𝑑𝑎𝑦𝑠 ≥ 100% ii. Net Stable Funding Ratio = 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑆𝑡𝑎𝑏𝑙𝑒 𝐹𝑢𝑛𝑑𝑖𝑛𝑔 𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑆𝑡𝑎𝑏𝑙𝑒 𝐹𝑢𝑛𝑑𝑖𝑛𝑔 ≥ 100% The description and criteria for each component of the LCR and NSFR ratios are defined in the Central Bank’s Liquidity Coverage Ratio Guideline and Net Stable Funding Ratio Guideline. Banks should notify the Central Bank immediately if their LCR or NSFR has fallen, or is expected to fall, below 100%.

DBFIA Practice Direction No. 9 Page 2 of 2 B. Transitional Arrangements To allow sufficient time for banks to fully comply with the LCR and NSFR requirements as specified in the corresponding Guidelines, its introduction is phased-in in accordance with the timeline as follows: i. a minimum of 70% effective 30 June 2024; and ii. a minimum of 100% effective 30 June 2025. C. Frequency of Reporting Banks are required to submit the BR3A (Liquidity Coverage Ratio) to the Central Bank monthly within fourteen (14) calendar days after the end of the reporting period, and BR3B (Net Stable Funding Ratio) quarterly within fourteen (14) calendar days after the end of the reporting period. The first reporting period is 30 June 2024. 8 July 2024