*4.1.3. Banking data computations*

Estimating the LCR and NSFR using available EMERG public data proved to be a challenge. Firstly, the prescripts for these risk standards are sometimes ambiguous and subject to frequent regulatory amendment. For instance, the final rules relating to the LCR were only published on Monday, 7 January 2013.

Secondly, the EMERG global banking data has several limitations in terms of granularity and format when compared with the information required to determine the Basel III liquidity standards (see, for instance, [9] and [17]). In all instances, we had to make difficult choices when applying Basel III guidelines to such a large diversity of banks.

In the absence of suitable data, we were heavily dependent on the interpolation and extrapolation techniques discussed below. Firstly, it is clear that the LCR calculation requires information about liabilities with a remaining maturity of less than 1 month. However, quarterly EMERG data provides information about liabilities with a remaining maturity of less than 3 months. So we had to extrapolate the liabilities with a remaining maturity of 1 month. There are two approaches to doing this. In the first instance, we can assume the maturity schedule is evenly distributed, such that the amount of liabilities with a remaining maturity of less than 1 month equals 1/3 of the amount of liabilities with a remaining maturity of less than 3 months. This is the approach adopted in this chapter. Secondly, as a robustness check, we can assume an extreme case, such that all liabilities with a remaining maturity within 3 months mature within the first month. In this instance, the guidelines require dividing liabilities into subcategories of retail deposits, unsecured wholesale funding and secured funding with different run-off rates (see, for instance, [9] and [17]). However, the information available from the EMERG global data lacks such granularity. Out of necessity, we have to make assumptions on the distribution of subcategories within their primary category. Without additional information, we generally assume equal distribution of subcategories within the primary category , . Finally, except for unused commitments, letters of credit and the net fair value of derivatives, we do not have the information required for calculating the liquidity needs of all other OBS items, such as increased liquidity needs related to downgrade triggers embedded in financing transactions, derivatives and other contracts. Therefore, our calculations of the LCR and NSFR are partial measures that capture a bank's liquidity risk as mainly reflected by its BS and to a lesser extent its OBS items (see [9] and [17] for more information).
