Module: | HQLA Classifications & Haircuts
Q4: Which of the following assets qualify as Level 1 High Quality Liquid Assets (HQLA) without any haircut or limit?
1. Cash (including excess CRR).
2. Government securities in excess of the minimum SLR requirement.
3. Overnight balances held with RBI under the Standing Deposit Facility (SDF).
4. Corporate Bonds rated AA- or above.
2. Government securities in excess of the minimum SLR requirement.
3. Overnight balances held with RBI under the Standing Deposit Facility (SDF).
4. Corporate Bonds rated AA- or above.
✅ Correct Answer: B
Exam questions from Liquidity Coverage Ratio (LCR) often focus on the classification of liquid assets.
Level 1 assets, which include cash, excess government securities, and SDF balances, face no haircuts or caps.
Corporate bonds rated AA- or above are classified as Level 2A assets under Basel III Liquidity Standards, attracting a 15 percent haircut and a 40 percent cap.
Level 1 assets, which include cash, excess government securities, and SDF balances, face no haircuts or caps.
Corporate bonds rated AA- or above are classified as Level 2A assets under Basel III Liquidity Standards, attracting a 15 percent haircut and a 40 percent cap.