IBANK 8.4.43 How to calculate total expected cash inflow

(1) Total expected cash inflow over a period is calculated by, for each contracted cash inflow over the period, multiplying it by the applicable inflow rate (giving the adjusted inflow), and then taking the total of all the adjusted inflows over the period.

Note Rules 8.4.44 to 8.4.48 specify inflow rates for many kinds of cash inflow, and give any necessary interpretative provisions. Those rules are based on Basel III LCR, IFSB–12 and IFSB GN 6. The interpretive provisions include only minimal explanation of why a particular kind of inflow receives the rate specified. For a fuller explanation, consult Basel III LCR (in particular, paragraphs 142–160), IFSB–12 and IFSB GN 6.

Guidance
An inflow rate does not represent an assumption about the risk of a default — instead, it represents the likelihood that the relevant obligation will be rolled over (so that the firm does not actually receive the cash) or that no cash will be received for some other reason. (The possibility of default is excluded by rule 8.4.43 (2) (a), which allows only inflows from performing exposures to be included.) Inflows for which an inflow rate of 0% is specified are effectively treated as not being receivable.
(2) When an Islamic banking business firm is calculating its cash inflows:
(a) it may include a contractual inflow from an exposure only if the exposure is classified under rule 4.3.3 as performing, and there is no reason to expect a default within the relevant period;

Note In rule 4.3.3, the category performing excludes exposures classified as special mention.
(b) it must not include any contingent inflow; and

Guidance for subrule (2) (b)
Contingent inflow would include expected returns on profit-sharing instruments.
(c) it must not include any inflow that would be received from an asset in the firm's HQLA portfolio.

Guidance for subrule (2) (c)
In a stressed situation, the assets in the firm's HQLA portfolio would already have been monetised. That is the purpose of those assets — to be monetised to provide liquidity. Consequently, in a scenario of liquidity stress, the contracted cash inflows from them would no longer be available to the firm.

Note When a firm calculates its total net cash outflows over a period for the purpose of calculating its LCR, it cannot include cash inflows over 75% of its total gross cash outflows over the period — see rule 8.4.21 (1) (b).
(3) The firm may include, in cash inflows during a period, profit payments that it expects to receive during the period.
Inserted by QFCRA RM/2018-2 (as from 1st May 2018).