Answer:
Central Bank
Computation of the LCR for Central Bank:
The LCR = 23%
Explanation:
Data and Calculations:
Central Bank balance sheet (in millions of dollars)
Assets Liabilities and Equity
Level 1
Cash $15 Stable retail deposits $ 190
Deposits at the Fed 30 Less stable retail deposits 70
Treasury bonds 145 CDs maturing in 6 months 100
Level 2A:
Qualifying marketable securities 50 Unsecured wholesale funding from:
GNMA bonds 60 Stable small biz deposits 125
Loans to AA-rated corporations 540 Less-stable biz deposits 100
Mortgages 285 Non-financial corporates 450
Premises 40 Equity 130
Total $1,165 Total $1,165
Cash inflows over the next 30 days from the bank's performing assets are $7.5 million. Calculate the LCR for Central Bank.
High Quality Liquid Assets:
Cash $15
Deposits at the Fed 30
Treasury bonds 145
Qualifying marketable securities 50
Total HQLA $240
Outflows:
Stable retail deposits $ 190
Less stable retail deposits 70
CDs maturing in 6 months 100
Stable small biz deposits 125
Less-stable biz deposits 100
Non-financial corporates 450
Total outflows $1,035
Cash inflows ($7.5)
Total cash flows $1,027.5
LCR = High Quality Liquid Assets/Total Cash flows
= $240/$1,027.5 = 0.23
b) The LCR is calculated by dividing the central bank's high-quality liquid assets by its total net cash flows over a 30-day stress period. The central bank's high-quality liquid assets include only those with a high potential to be converted easily and quickly into cash and can be categorized into three of level 1, level 2A, and level 2B.
