Large Bank Supervision Forum eBook

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Optimize the pledging of collateral . . .

 As a result of these borrowing availabilities, as of now, the following should be the prioritization of pledging collateral:

Asset Classification Collateral Optimization Eligible Securities Bank Term Funding Program All other Securities FRB Mortgages FHLB CRE FHLB Multi Family FHLB All Other Loans FRB

 Borrowing will only count for liquidity when collateral is present  The pledging of securities needs to be reviewed at least quarterly  Ensure security safekeeping aligns with the chart above  Banks should also line up other Borrowing Sources as available  Pledging securities to the BTFP only decreases on-balance sheet liquidity ratio when those securities become encumbered  Banks should pledge all eligible securities even if this action decreases on-balance sheet liquidity ratio below 10%

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Securities that are pledged, but unencumbered should still count as on-balance sheet liquidity . . .

 A bank can sell a security today, unpledged it today and have it available for delivery in a T+2 timeframe.  This becomes more important when securities are at a positive market value

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