Module: | Objective, Scope & Regulatory Baseline
Q3: Which of the following correctly describes the "Consolidated LCR" treatment for cross-border banking groups?
1. Surplus HQLA: Surplus HQLA held in a subsidiary can only be included in the consolidated stock if it is freely transferable to the parent entity.
2. Retail Deposits: For retail and small business deposits, the group must generally follow the liquidity parameters of the *host* jurisdiction where the entity operates.
3. Transfer Restrictions: The calculation must ignore local currency convertibility restrictions to ensuring a standardized global metric.
2. Retail Deposits: For retail and small business deposits, the group must generally follow the liquidity parameters of the *host* jurisdiction where the entity operates.
3. Transfer Restrictions: The calculation must ignore local currency convertibility restrictions to ensuring a standardized global metric.
✅ Correct Answer: B
This concept within Liquidity Coverage Ratio (LCR) is important because it governs how global banks manage liquidity across borders.
Consolidated calculations must respect transfer restrictions; thus, surplus HQLA is only counted if freely transferable.
Additionally, Net Cash Outflows for retail deposits follow host jurisdiction rules to reflect local behavior, contrary to the idea of ignoring local restrictions.
Consolidated calculations must respect transfer restrictions; thus, surplus HQLA is only counted if freely transferable.
Additionally, Net Cash Outflows for retail deposits follow host jurisdiction rules to reflect local behavior, contrary to the idea of ignoring local restrictions.