BKLM315630 - Chargeable equity and liabilities: adjustments: step 4 in paragraph 15N: high quality liquid assets

Paragraphs 15Z of Schedule 19

Step 4 in paragraph 15N allows the amount given by step 3 to be reduced (but not below nil) by the amount of the entity’s or sub-group’s relevant high quality liquid assets (see BKLM360000 and BKLM361000).

This includes cases where a financial asset is recognised for an advance of cash, and where the underlying collateral for that advance would consist of high quality liquid assets were they on balance sheet (for example where the high quality liquid asset has been acquired under a reverse repo).

The amount of this reduction is the lower of the balance sheet amount of the financial asset (for example the reverse repo debtor) or the fair value of the collateral as at the end of the chargeable period. Where more than one financial asset of this type are held by the entity or members of its sub-group the amount of the reduction is the sum of these.

When making the reduction at step 4 exclude:

• any asset that comprised part of a netting adjustment at step 2 (see BKLM315613);
• any asset which is taken into account in determining the reduction at step 3 (see BKLM1315620); or
• where the Bank Levy is charged on a group that has a member that is a relevant foreign bank, any asset which comprises part of a netting adjustment for the purpose of determining the chargeable equity and liabilities of that relevant foreign bank (see BKLM379000).