1. a.IB shall calculate total cash outflows based on the categories of cash outflows as listed below. Each category consists of various types of liabilities or IA, which have their own run-off factors tied to their behavioral characteristics.
2. b.Treatment of IAs
   Income-earning deposits with IB, whether retail or wholesale, typically take the form of IA, which are categorised as follows:
   a) Restricted IA (RIA), and
   b) Unrestricted IA (UIA).
3. c.The applicable run-off factor for IA depends on the withdrawal rights of the IAH and whether they are retail or wholesale accounts. Whether the IA are reported on-or off-balance sheet is not relevant. In the case of RIA, IAH may or may not have the right to withdraw funds before the contractual maturity date. For RIA with no withdrawal rights prior to maturity, the IB managing the RIA is not exposed to run-off for LCR purposes, unless the contract maturity date falls within the next 30 days. Alternatively, IAH may have withdrawal rights subject to giving at least 30 days’ notice. In this case, also, the IBs managing these RIA is not exposed to run-off from them for LCR purposes (except for those accounts for which notice of withdrawal has been given and the withdrawal date falls within the next 30 days, or those which mature within the next 30 days). Only in the case of RIA from which the IAH may withdraw funds at less than 30 days’ notice without any “significant reduction of profit” is the IB exposed to run-off for LCR purposes. To be “significant”, a reduction of profit must be considerably more than a mere loss of accrued income. Where an IB offers such RIA, it would be expected to retain a proportion of HQLA in the relevant RIA fund in order to meet withdrawals, in which case the HQLA would be netted off the amount of the run-off in calculating the total net cash outflows. However, it must be noted that if an IB has voluntarily waived such restrictions and permitted withdrawals to be made at short notice (i.e. less than 30 days) without any significant reduction of profit, such restrictions will have to be ignored subsequently in determining the applicable run-off factor. The run-off factor applied to the RIA is based on the aforementioned minimum ratios. Where the funds of RIA are invested in assets with a liquid secondary market, such that under normal conditions the assets may be monetised rapidly in time to meet a demand for withdrawal, there is a risk that under stressed conditions it may not be possible to monetise the assets so readily. Hence, there is a potential exposure to a (net) run-off for LCR purposes. The amount of the run-off for LCR purposes must therefore be reduced only in respect of cash and HQLA held in the RIA fund.
4. d.For UIA, in some cases withdrawals will be permitted either on demand or at less than 30 days’ notice. The run-off factor applied to UIA depends on the contractual withdrawal rights of the IAH.
5. e.Retail Deposits and IAs
   Retail deposits are separated into stable and less stable deposits. Stable retail deposits receive 5% run off and less stable receive 10% run off.
6. f.Current retail deposits/IA are considered stable if:
   1. i.They are resident deposits and,
   2. ii.A relationship with the customer has been well established, for example the customer has been dealing with the bank for over 1 year; or
   3. iii.The customer uses the account for transactions such as salary being deposited in the account, paying bills and standing order payments.
7. g.Retail term deposits/IA which are maturing within the 30 day period are classified as stable if:
   1. i.They are resident deposits, and
   2. ii.A relationship with the customer has been well established, for example, the term deposit has a history of being rolled over at maturity with the IB, or the relationship has been established for over 1 year with the customer.
8. h.Deposits from small and medium sized entities (SMEs) can be treated as retail deposits (as per the clauses above), if their deposit amount is less than AED 20 Million.
9. i.Unsecured deposits from non-financial corporates – 40% run off for Non- operational and 25% run off for operational.
10. j.Unsecured Wholesale Funding
    Unsecured wholesale funding is defined as those liabilities and general obligations of the IBs that are raised from non-natural persons such as legal entities, including sole proprietorships and partnerships and are not collateralised by legal rights to specifically designated assets owned by the funding institution in the case of bankruptcy, insolvency, liquidation or resolution. The wholesale funding included in the LCR includes funding that is callable within the LCR’s horizon of 30 days or that has its earliest possible contractual maturity date situated within this horizon, as well as funding with an undetermined maturity. Wholesale funding that is callable by the funds provider subject to a contractually defined and binding notice period surpassing the 30-day horizon is not included.
11. k.The outflows to unsecured wholesale funding are further categorised into five categories. First are current and term accounts (less than 30 days’ maturity) provided by small business customers. As with the categorisation of retail deposits, these types of current and term accounts are further divided into stable and less stable deposits. Treatment of the current and term accounts provided by small business customers is also similar to the treatment of the retail deposits. Stable deposits are assigned a 5% run-off factor, while less stable deposits are assigned run-off factors based on the different buckets that are determined according to the risk profiles of each group, with a minimum run-off factor of 10%. As indicated above, in the case of IBs that do not practice “smoothing” of profit payouts to IAH, a higher run-off factor must be applied. Categorisation of the buckets and their run-off factors shall be similar to that of the buckets of less stable current and term accounts in the retail category.
12. l.The second category is operational accounts generated by clearing, custody and cash management activities. These deposits are defined as deposits placed by financial and non-financial customers in order to facilitate their access to and ability to use payment and settlement systems and otherwise make payments. These funds are assigned a 25% run-off factor. However, this factor is only applicable if the customer has a substantive dependency on the IBs and the deposit required for such activities, and meets the international definition and qualifying criteria for funds to be recognised as operational accounts.
13. m.In order to ensure consistent and effective implementation of operational accounts, one or more of the following criteria for determining the eligibility of any account as an operational account must be met:
    1. i.used for providing cash management, custody or clearing products only;
    2. ii.must be provided under a legally binding agreement to institutional customers;
    3. iii.termination of these accounts shall be subject to either a notice period of at least 30 days or a significant reduction of profit for closing these accounts; and
    4. iv.returns on these accounts are determined without giving any economic incentive to the customer to leave any excess funds in the accounts.
14. n.Any excess balances that could be withdrawn and would still leave enough funds to fulfil the clearing, custody and cash management activities do not qualify for the 25% factor. In other words, only that part of the deposit balance with the service provider that is proven to serve a customer’s operational needs can qualify as stable. Excess balances must be treated in the appropriate category for non-operational accounts. If the IB is unable to determine the amount of the excess balance, then the entire deposit must be assumed to be excess to requirements and, therefore, considered non-operational. The IB must determine the methodology for identifying excess deposits that are excluded from this treatment. This assessment must be conducted at a sufficiently granular level to adequately assess the risk of withdrawal in an idiosyncratic stress scenario.
15. o.The third category includes funds from an institutional network of cooperative IB. In some jurisdictions, there are IBs that act as “central institutions” or central service providers for lower-tier IBs, such as Islamic cooperatives. A 25% run-off rate can be applied by such an IBs to the amount of deposits member institutions place with it as their central institution or specialised central service provider that are placed (a) due to statutory minimum deposit requirements, and which are registered at regulatory authorities, or (b) in the context of common task-sharing and legal, statutory or contractual arrangements. As with other operational accounts, these deposits would receive a 0% inflow assumption for the IBs. Supervisory approval would be needed in each case to ensure that IBs utilising this treatment actually are the central institutions or central service providers (e.g. to a cooperative network).
16. p.The fourth category is unsecured wholesale funding provided by non-financial corporates and sovereigns, the Central Bank, MDBs and PSEs. A 40% run-off factor is applicable to funds from such sources that are not specifically held for operational purposes.
17. q.The last category is “other entities”. This category consists of all deposits and funding from other institutions including, among others, banks, IBs, securities firms, insurance or Islamic insurance (Takaful) companies, etc., fiduciaries and beneficiaries, conduits and special purpose vehicles, affiliated entities of the IBs, and any other entities that are not specifically held for operational purposes and are not included in the prior categories. The run-off factor for these funds is 100%.
18. r.Secured Funds
    Secured funding is defined as liabilities and general obligations with maturities of less than 30 days that are collateralised by legal rights to specifically designated assets owned by the counterparty in the case of bankruptcy, insolvency, liquidation or resolution. Various run-off factors are assigned to these funds, depending on the type of collateral. The secured funding transactions with a central bank counterparty or backed by Level 1 assets with any counterparty are assigned a 0% run-off factor. A 15% run-off factor is assigned to secured funding transactions backed by Level 2A assets with any counterparty.
19. s.Higher run-off factors are assigned to secured funding not backed by Level 1 or Level 2A assets. Secured funding transactions backed by assets that are neither Level 1 nor Level 2A, with domestic sovereign, MDBs or domestic PSEs as a counterparty, as well as secured funding backed by commodity or real assets eligible for inclusion in Level 2B, may receive 25% run-off factors. On the other hand, secured funding backed by other Level 2B assets and all other secured funding transactions that do not fall within the above categorisations shall be assigned 50% and 100% run-off factors, respectively.
20. t.For all other maturing transactions, the run-off factor is 100%, including transactions where IB has met customers’ short positions with its own long inventory. Table below summarises the applicable standards.
21. u.For all other maturing transactions, the run-off factor is 100%, including transactions where IB has met customers’ short positions with its own long inventory. Table below summarises the applicable standards.
22. Amount to Add to Cash Outflows:

     Additional Requirements:

1. v.Some instruments under this category could include Shari’ah-compliant hedging (Tahawwut) instruments, which are assigned a 100% run-off factor; undrawn credit and liquidity facilities to retail and small business customers, which are assigned a 5% run-off factor; undrawn financing facilities to non-financial corporates as well as sovereigns, central banks, PSEs and MDBs, which are assigned a 10% run-off factor for credit and a 30% run-off factor for liquidity; as well as other contractual obligations extended to financial institutions/IBs, which are assigned a 100% run-off factor.
2. w.Some instruments under this category could include Shari’ah-compliant hedging (Tahawwut) instruments, which are assigned a 100% run-off factor; undrawn credit and liquidity facilities to retail and small business customers, which are assigned a 5% run-off factor; undrawn financing facilities to non-financial corporates as well as sovereigns, central banks, PSEs and MDBs, which are assigned a 10% run-off factor for credit and a 30% run-off factor for liquidity; as well as other contractual obligations extended to financial institutions/IBs, which are assigned a 100% run-off factor.
3. x.Shari’ah-compliant Interbank Contracts
   The instruments traded in the conventional interbank market are usually short-term and liquid in nature, and their maturities range from one day up to a year. The trading is wholesale and mostly conducted over the counter. An Islamic interbank money market would essentially perform similar functions with the exception that the instruments used must comply with Shari’ah principles. Widely used Shari’ah-compliant instruments used by IBs for interbank liquidity management are based on Mudarabah, commodity Murabahah or Wakalah arrangements. All these contracts are structured as unsecured wholesale funding. The run-off rate applied to these transactions, maturing in the next 30 calendar days, is 100%.