Basel III framework for liquidity - Frequently asked questions
This document sets out the first set of frequently asked questions that relate to Basel III’s liquidity rules. The first section of the document provides clarification on the calculation of the cap on Level 2 assets with regard to short-term secured funding. Section 2 addresses other questions and answers pertaining to the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) of the rules text. Section 3 sets out miscellaneous edits to the rules text.
Sovereign risk is the extra dimension of risk
involved in international, as distinct from domestic, transactions. Sovereign
risk is an aspect of the credit
proposal that is additional to the usual commercial risks such as credit, foreign
exchange and transport risks, and is outside the individual borrower's
control; it can override the borrower's willingness and ability to repay
financial obligations, even though the borrower may be a government. Sovereign risk implies the possibility that
conditions will develop in a country which inhibit repayment of funds
due from that country, such as exchange
controls, strikes or declarations of war.
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