PRA has today issued a discussion paper on supporting liquid asset usability.
In response to the global financial crisis 2007/2008, banks were required to have a large enough stock of HQLA to meet their payment obligations in the case of a severe short-term stress to both their funding and collateral values (via both the Pillar 1 LCR and Pillar 2 liquidity guidance); and banks were required to have stable funding profiles over a longer time period in relation to the composition of their assets and off-balance sheet activities (via the NSFR), reducing the risk of slower burn funding runs.
The PRA now seeks views from banks, wider market participants, and other interested parties to continue to improve understanding of:
- to what extent banks feel constrained in their ability to draw on their stock of HQLA to meet unusual liquidity demands;
- what factors affect this; and
- to what extent it is desirable that banks feel more able to draw on their HQLA, and how this could be achieved.
Responses are requested by Thursday 30 June 2022 and should be sent to DP1_22@bankofengland.co.uk.