Consultation Paper - Amendments to Liquidity Coverage Ratio Outflow Rates for Specific Financial Counterparties

Summary

This is a BMA consultation paper proposing changes to how local banks calculate deposit outflow rates in the Liquidity Coverage Ratio (LCR) for three specific categories of business customer deposits. It invites industry feedback on the proposal before a planned implementation date.

• Affected deposit types: Trust customers (LCR/1220.15), captive and inward insurance customers (LCR/1220.16), and fund management customers (LCR/1220.17)
• Current treatment: These deposits currently carry a 100% outflow rate under the Basel III standard
• Proposed change: Banks could apply national discretion to use lower, more favourable outflow rates for these deposits, subject to BMA approval and eligibility criteria
• Evidence required: Banks must produce a deposit behavioural analysis, refreshed at least annually, using a minimum of ten years of relevant data, concluding on the appropriate outflow rate for the segment
• BMA review: If the BMA is satisfied with the analysis, it will formally communicate a more favourable outflow rate to the bank, applicable for the following 12 months until the next review
• Proposed effective date: 1 April 2022

As a consultation paper, this document does not itself impose binding requirements; it sets out proposed rule changes and solicits stakeholder comments before finalisation.

Key obligations

• Stakeholders wishing to comment must email banking@bma.bm by close of business on 31 March 2022
• If banks seek a more favourable outflow rate than 100% for the specified counterparties, they must produce a deposit behavioural analysis using at least ten years of relevant data and refresh it at least annually
• Banks must obtain BMA approval before applying a national discretion outflow rate lower than 100% for the specified deposit types

Applies to

local banks

Deadlines

• 31 March 2022: Deadline for industry and stakeholders to submit feedback on the consultation paper by emailing banking@bma.bm
• 1 April 2022: Proposed effective date for adoption of the amended outflow rate treatment
• annually: Deposit behavioural analysis supporting any favourable outflow rate must be refreshed at least once a year
• next 12 months: A BMA-approved favourable outflow rate applies for 12 months until the next review period