8. Credit unions should only include liquid assets that can be monetized through operational capability; the credit union should have procedures and appropriate systems in place, including providing the liquidity management function with access to all necessary information, to execute monetization of any asset at any time.
Other unencumbered liquid assets
9. Assets received in reverse repurchase agreements and securities financing transactions that are held at the credit union, have not been re-hypothecated, and are legally and contractually available for the credit union’s use can be considered as part of the pool of liquid assets and included in month 1.
10. Credit unions may receive liquidity value for collateral swaps provided they can clearly demonstrate that, at a minimum, the transactions are for a specified contract period, the securities used for the underlying collateral being swapped are outlined in the transaction details, mark-to-market procedures are understood and documented, and there is not substitution of collateral over the life of the contract, unless it is a like-for-like substitution. In addition, credit unions should have adequate and ongoing market risk management control and oversight of collateral swap activity, and recognize liquidity or cash flow implications at the termination of the swap.
Cash inflows from reverse repurchase agreements which do not meet the conditions outlined above are assumed to occur at contractual maturity.
11. Demand deposits with centrals, leagues or other financial institutions are to be treated as cash inflows in month 1. Term deposits are treated as cash inflows in the earliest contractual maturity time bucket.
12. Cash inflows from other government securities, mortgage-backed securities, asset-backed securities, corporate commercial paper, and corporate bonds, which are not considered eligible unencumbered liquid assets, should be reported in the contractual maturity time buckets.
For securities eligible as unencumbered liquid assets, balances are treated as cash inflows in month 1 after the appropriate haircut. Cash inflows are limited to the face value of the security.
13. Cash inflows from securities borrowed are assumed to occur at contractual maturity for the principal amount borrowed. Interest will not be recognized as a cash inflow.
14. Other investments, which are not considered eligible unencumbered liquid assets, are to be reported in greater than 12-month time bucket with the exception of cash inflows for dividends which are to be reported on the declaration date.
Personal loan portfolio
15. Credit unions have the option to report (a) blended loan amortization and interest payment inflows or (b) suppress interest payments and report loan amortization payments only as appropriate. Whichever method is adopted must be consistent with reporting deposit payment outflows (Refer paragraph 33). Non-performing loans are loans that are greater than 90 days delinquent.
16. Credit unions should only include contractual inflows from outstanding exposures that are fully performing. Contingent inflows are not to be included in cash inflows.
17. No cash inflow value would be received for inflows from balances at maturity, as residential mortgages are assumed to roll over at 100%. Payment inflows are assumed to continue at the same level for month 1 to 12.
Securitized residential mortgages
18. Balances at maturity and the balance of period amortization payments of residential mortgages securitized and unsold (i.e. the mortgage backed securities) are treated as cash inflows in the first time bucket after the appropriate haircut is applied and reported under HQLA.(refer to paragraph 7) .
19. For residential mortgages securitized Ohio cash advance and used to back Canada Housing Trust (CHT) swaps, cash inflows from these securitized mortgages, both balance at maturity and periodic amortization payments, are to be reported in time buckets corresponding to the CHT swap contractual maturity. For mortgages securitized and encumbered, the corresponding liability is not assumed to roll over.