IBANK 8.4.39 Treatment of drawdowns on committed financing and liquidity facilities

(1) The runoff rates for drawdowns on committed financing and liquidity facilities are as set out in table 8.4.39.
(2) A financing facility is a Shari'a-compliant contractual agreement or obligation to extend funds in the future to a retail or wholesale counterparty. For this rule, a facility that is unconditionally revocable is not a financing facility.

Note Unconditionally revocable facilities (in particular, those without a precondition of a material change in the borrower's credit condition) are included in contingent funding obligations (see rule 8.4.41).
(3) A liquidity facility is an irrevocable, undrawn financing facility that would be used to refinance the debt obligations of a customer if the customer were unable to roll over the obligations in financial markets.

Guidance
General working capital facilities for corporate borrowers (for example, revolving financing facilities for general corporate or working capital purposes) are to be treated as financing facilities.

Table 8.4.39 Drawdowns on committed financing and liquidity facilities — runoff rates

Item Kind of facility Runoff rate (%)
1 Financing and liquidity facilities provided to retail and small business customers 5
2 Financing facilities provided to nonfinancial corporates, sovereigns, central banks, MDBs, and public sector enterprises 10
3 Liquidity facilities provided to nonfinancial corporates, sovereigns, central banks, MDBs, and public sector enterprises (see subrule (7)) 30
4 Financing and liquidity facilities provided to banks that are subject to prudential supervision (see subrule (7)) 40
5 Financing facilities provided to other financial institutions 40
6 Liquidity facilities provided to other financial institutions (see subrule (7)) 100
7 Financing and liquidity facilities provided to legal entities of any other kind (see subrule (7)) 100
(4) For a facility, the relevant runoff rate is to be applied to the undrawn part of it.
(5) The undrawn portion of a financing facility or liquidity facility is to be calculated net of any HQLA lodged or to be lodged as collateral if:
(a) the HQLA have already been lodged, or the counterparty is contractually required to lodge them when drawing down the facility;
(b) the firm is legally entitled and operationally able to rehypothecate the collateral in new cash-raising transactions once the facility is drawn down; and
(c) there is no undue correlation between the probability of drawing down the facility and the market value of the collateral.
(6) The firm may net the collateral against the outstanding amount of the facility to the extent that the collateral is not already counted in the firm's HQLA portfolio.
(7) The amount of a liquidity facility is to be taken as the amount of outstanding debt issued by the customer concerned (or a proportionate share of a syndicated facility) that matures within the relevant 30-calendar-day period and is backstopped by the facility. Any additional capacity of the facility is to be treated as a committed financing facility.
(8) The firm must treat a facility provided to a hedge fund, money market fund or SPE, or an entity used to finance the firm's own assets, in its entirety as a liquidity facility to a financial institution.
Inserted by QFCRA RM/2018-2 (as from 1st May 2018).