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BNM/RH/GL 001-07

Prudential Financial Policy Department

Liquidity Framework

Page 7/28

6.3.

6.4.

6.5.

6.6.

6.7.

· · free from any encumbrances that restricts its sale or repo capability (for example, not pledged to third parties or under repo agreements); and have sufficiently deep secondary market or repo market which continue to exist during tight liquidity situations, or which Bank Negara Malaysia is prepared to purchase, lend or allowed for repo in the course of its money market or liquidity support operation. Assets held under reverse repo are also eligible for liquefiable asset status for the period under the reverse repo. Assets sold under repo will not be eligible only for the period under repo. To reflect a more conservative value of funds that can be raised from the sale of liquefiable assets under desperate circumstances, the value of liquefiable assets will be measured at a discount to its mark-to-market value. Assets that fulfill the qualifying characteristics specified in paragraph 6.2 are known as Class-1 liquefiable assets. It is also recognized that a number of other debt instruments which are subject to individual issuer credit consideration and thus with less assured liquidity quality can assist in raising funds for banking institutions experiencing short-term liquidity problem either through outright sale or repo agreements. These assets may also be considered as liquefiable assets although for valuation purposes, they will be subject to higher discounts. These are known as Class-2 liquefiable assets. Formally available credit lines are arranged irrevocable credit facilities which the banking institution has paid a consideration for. The undrawn portion provides a reserve which the banking institution can draw upon during liquidity crisis. To qualify:

·

·

the facilities must be irrevocably available for at least the next 3 months; the funds must be available for immediate drawdown at any time. They must not be subject to availability of funds clause; and

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