Module: | HQLA Classifications & Haircuts
Q5: Regarding the caps and haircuts for Level 2 HQLA, which of the following combinations is correct?
✅ Correct Answer: A
A key idea tested in Liquidity Coverage Ratio (LCR) relates to the strict valuation adjustments applied to less liquid assets.
Level 2 assets are collectively capped at 40 percent of the total HQLA stock.
Specifically, Level 2A assets face a 15 percent haircut, while Level 2B assets face a 50 percent haircut, ensuring the stock retains high value during stress.
Level 2 assets are collectively capped at 40 percent of the total HQLA stock.
Specifically, Level 2A assets face a 15 percent haircut, while Level 2B assets face a 50 percent haircut, ensuring the stock retains high value during stress.