HQLA must be liquid in stressed markets, ideally central bank eligible, and meet the characteristics in LCR30.2 to LCR30.12. Every asset in the stock must be unencumbered, under the control of the liquidity management function (eg the treasurer), operationally capable of being monetised within the standard settlement period, and the bank must periodically monetise a representative proportion by repo or outright sale (LCR30.13 to LCR30.18). The bank needs a policy identifying the legal entity, location, currency and account where HQLA sit and must be able to determine the stock's composition daily (LCR30.20); rehypothecated assets the owner can withdraw within 30 days are excluded (LCR30.24), and an asset that becomes ineligible may be kept for 30 calendar days (LCR30.28). Level 1 assets are unlimited and carry no haircut; Level 2 assets are capped at 40% of the stock after haircuts, Level 2B at 15%, with caps computed after unwinding secured transactions maturing within 30 days (LCR30.31 to LCR30.37, LCR30.40). Level 2A assets take a 15% haircut and require a 20% risk weight or AA- rating with price declines within 10%; Level 2B RMBS take 25%, and Level 2B corporate debt (BBB- or better) and equities take 50% (LCR30.43, LCR30.45). The stock must be diversified with limits by asset, issuer and currency (LCR30.29).
The graph holds this control, the 0 it maps to, and the evidence behind each claim, over MCP and REST.