General Instructions

This Microsoft Excel workbook was developed by Farin & Associates and is designed to be used in conjunction with the ABA Liquidity Toolbox.
Disclaimer
Keep in mind that this is NOT commercial software. Rather, it is provided as a no-cost service to ABA members.
We make no warranties as to the suitability of its use for capital planning and calculation of the Basel Liquidity Coverage Ratio.
The Capital Planning worksheet was designed to be used as a boardroom level tool for setting long-range and intermediary financial goals. No representation is being made as to its
suitability for developing regulatory capital plans.
The Liquidity Coverage Ratio was designed to perform calculations described in the Basel III International Framework for Liquidity Risk Measurement, Standards, and Monitoring
issued December, 2010. The layout of this worksheet generally covers the format of Annex I of that document. However, at the time this spreadsheet was developed, U.S.
regulatory agencies had not addressed the Basel document or incorporated content of that document in either their guidance documents or regulation. There are a significant number
of issues US regulatory agencies will need to address in adapting the Basel LCR to U.S. banks. In building the worksheet it was necessary to make a number of assumptions as to
how US regulators might handle these issues. Before using this worksheet as part of your liquidity management program, please check the ABA Liquidity Toolbox resource to see
whether a more recent version of this worksheet is available.
Workbook Worksheets
This workbook contains the following worksheets. They are accessed by clicking the tabs at the bottom of the worksheet.

The following worksheets are contained in this workbook.

This is the worksheet you are currently viewing. When not selected, it will be Orange in color.
Contains a non-editable screen shot of the XYZ Capital Plan worksheet. To the right of the screen shots it also contains instructions on the
use of the worksheet. Numbers are from Tool 1. The layout of this page is a bit different from the layout of the Capital Plan tab in order to illustrate
sequence of steps you should follow in using the worksheet.
This is an editable blank version of the Capital Plan worksheet for you to use in developing a similar plan for your institution. The worksheet is locked.
You will only be able to enter numbers and labels into designed input areas. Popup messages give you a bit more information on what should be entered
than contained on the XYZ Capital Plan tab. Note that the worksheets are not password protected, allowing you to unlock worksheets if needed.
However, please do not ask us to support worksheets that have been unlocked and modified.
This is a non-editable series of exhibits that supplement the calculations on the Capital Plan worksheet. There are no input areas on this worksheet.
Contains a non-editable screen shot of the XYZ Liquidity Coverage Ratio worksheet. To the right of the screen shots it also contains instructions on the
use of the worksheet. Numbers are from Tool 4. The layout of this page is a bit different from the layout of the Capital Plan tab in order to illustrate

This worksheet is a product of FARIN & Associates.

2011 American Bankers Association, 1120 Connecticut Ave NW, Washington, DC 20036. All rights reserved.

rights reserved.

You will find this block in the top left corner of the Capital Plan worksheet.
It contains two input areas, Institution name in Cell E1, and As of date in Cell B2.
All dates appearing in this worksheet are calculated from the As of date entered.
As can be seen throughout the worksheet, all input areas are in blue. Fill in the
date for the most recent historical data you will be entering in Cell B2, and your
institution's name in Cell E1.

You will find this input area in Cells K2 through N22 of the Capital Plan worksheet.
The headings for the three columns are calculated from the As of date entered in
cell B2. The yearend balance sheet numbers entered in cells N3 through N10
should be for the institution balance sheet on the day of the As of date.
The income statement number entered in cell N11 should be for the 12-month
period ending with the As of date.
Because the balance sheet numbers represent the starting point of the plan,
their input is crucial to the operation of the model.
The three years of historical ratios entered in cells L13 through N22 should be for
the three full years ending with the As of date. Note that these ratios are used in
the Capital Plan worksheet in three ways. They provide the three years of history
in the graphs covering 8 years of performance in Columns A-D of the worksheet.
The ratio for the most recent (rightmost) year appears on the first line of the trend
input areas in Column F next to the year of the As of date. Finally, some of the
ratios appear in the Curr/Rct column of the Strategic Financial Goals worksheet.
None of these ratios is a crucial input to the operation of the model, particularly
the ratios in Columns L and M. The ratios in Column N provide a starting point for
setting strategic goals and annual goals and as such are a bit more important.

You will find this input area in Cells K25 through N36 of the Capital Planning Model.
In this area you will set and balance long range financial goals and set targets
for long-range balance sheet mix.
Strategic Financial Goals represent long-range targets for your institution's
performance in the areas of earnings, growth, capitalization (leverage capital),
and dividends. Balance sheet mix goals set targets for the optimum
mix of your balance sheet considering both risk and return. This spreadsheet
incorporates four calculations in the balanced column. ROA is calculated
based on inputs for ROE and Capital/Assets. The implication of this calculation
is that you should set a ROA goal equal to the balanced calculation if you want

your ROA goal to be consistent with ROE and capital/assets.

The organic capital growth rate is calculated from your ROE and Dividend/Income
goal. The implication is that if you want your balance sheet to remain in balance
over time, your loan growth rate and deposit growth rate need to match your
organic capital growth rate. The exception to this rule would be if an external
capital action like a stock issue or a stock repurchase is anticipated.
Use Column M to set your Strategic Financial Goals. These goals are crucial in
that they represent the targets you will be shooting for in setting your annual
goals in the next steps.

The rectangular areas beginning at Cell A3 and extending through Cell I101 are a linked
series of spreadsheets used to set annual goals that mark progress toward reaching
the Strategic Financial Goals established in the previous step. Each small spreadsheet
displays results for the most recent historical period as the first entry, and the Strategic
Financial Goal (SFG) as the last entry. In the example to the left, XYZ Bank has
investments equal to 6.5% of assets as of 12/31/09, totaling $19.513 million. They have
set a Strategic Financial Goal to bring investments to 12.0%. The input areas allow
annual goals to be set by year for the five plan years. In this example, the goal for
Investment/Assets steps from 9% of assets in 2010 to 11% of assets in 2011 and 12%
of assets in 2012 and in the following two years.
This series of three spreadsheets are linked and together drive annual growth in total
assets. Forecast numbers appearing in Columns G and H are not meaningful
until all three input areas have been completed. Graphs display three years of
history for each ratio (assuming they were input earlier) and five years of forecast.
In addition to investments as a percentage of assets, non-earning assets (NE Assets)
are also projected as a percentage of assets. The most important factor in driving
growth in total assets in this section is the annual loan growth rate, although
Investments/Assets and Non-Earning Assets/Assets also play a role in projecting total
assets.
The assumptions entered in this section take total assets down from $300 million to
a low of $261 million in 2011, and back up to $304 million by the end of 2014.
Note that the Loan Growth Rate is lower than the Asset Growth Rate in the first three
years of the forecast primarily because investments are increasing as a percentage
of assets. In year 4, loan growth is below asset growth because while investments
as a percent of assets have stabilized, non-earning assets declined as a percentage
of assets in year 4. In year 5, loan growth and asset growth are the same
as there were no changes in asset mix between years 4 and 5 so loan growth directly
drove asset growth.

The Core Growth Rate block obtains your annual projections of growth rate in core
funding. Because it is compounding the 12/31/2009 core funding balance entered in
the input area, projected balances for core funding are totally independent of any other
assumption input in Columns A-I.
Because other liabilities are projected as a percentage of assets, the balance
projections in Column G are calculated using the total asset projections in Cells
H26 through H30, and the percentage assumptions entered in this area.
Balance projections shown in Column G are meaningful as long as the total asset
projections from the previous instruction block remain unchanged.

These three blocks are used to project earnings, dividends, and inflow and outflow of
capital from capital actions like stock issues and stock repurchase.
It is important to note that projected ROA is an input to the model rather than an output.
Institutions using this model are likely to set annual ROA goals then use their planning
model to develop a detailed plan that attempts to achieve the goals.
ROA projections are input by year for five years. Those ROAs are multiplied by
projected average assets (beginning plus ending assets divided by 2) to forecast net
income. The forecast net income figures are relevant when entered as long as the
factors driving total assets are not modified.
Dividends are projected as a percentage of net income projected in the previous block.
These percentages times the income figures forecast dividend payouts in Column G.
Column H allows inflows and outflows of capital for reasons other than dividend
payments to be entered. Capital inflows from transactions like new stock issues are
entered as positive numbers. Capital outflows from transactions like stock repurchases
are entered as negative numbers. Remember to keep the numbers at the same level of
detail here as in the data entry area (we recommend thousands of dollars). Ending
capital considers beginning capital, earnings less dividends, and capital actions
(stock issue or buy back).
From ending capital and ending assets, Ending Capital/Assets is calculated. The
Equity Multiplier is Average Assets divided by Average Capital.

Projected ROE is calculated by multiplying projected ROA times the Equity Multiplier.
NonNr Core/Assets is the balancing account that keeps total liabilities and
capital equal to total assets. If you take total assets from Cells H26 through H30
less the sum of total core deposits, total other liabilities, and total capital, the result will
be ending non-regulatory core funding. The model automatically runs this calculation
and provides the results in dollars and as a percentage of assets.
Because of the way the model is built, it is possible for non-regulatory funding to go
negative in the model, which is impossible in the real world. The most likely cause of
this problem is a deposit growth rate that causes the sum of total liabilities and capital
without the balancing account to exceed total assets. The best way to correct this
problem is to either reduce the deposit growth rates or increase loan (and asset) growth.
Note that this series of instructions presumes assumptions will be dealt with and
entered in same the sequence in this set of instructions. However, once your initial
assumptions are entered, you are likely to want to tune your assumptions. This
tuning can be accomplished in any order you wish as long as you keep in mind the
interaction between assumptions and results explained in this series of notes.

This image is the first on the Relationships tab. It diagrams the relationship between
ROE, ROA and the Capital/Asset Ratio. This is purely an output spreadsheet.
No input is required or necessary.

This image is the second on the Relationships tab. It diagrams the relationship between
ROE, Dividends and goals set for loan and deposit growth rates. This is purely an
output worksheet. No input is necessary.

This image is the third on the Relationships tab. It diagrams the changes in asset mix
and funding mix that result from goals set for the plan. Three years of history are shown
along with the five forecast years. This is strictly an output worksheet. No input is
necessary.

ate in Cell B2.

ate entered.

n worksheet.
te entered in

should be for
s are used in
ars of history
worksheet.
e of the trend

worksheet.

rting point for

lanning Model.

calculation

dend/Income
n in balance

e crucial in

ell I101 are a linked

oward reaching
small spreadsheet
and the Strategic
Z Bank has
million. They have
put areas allow
e, the goal for
in 2011 and 12%

al growth in total
ot meaningful
hree years of
s of forecast.

sets (NE Assets)

ctor in driving

n projecting total

$300 million to

in the first three

s a percentage
e investments
as a percentage

n growth directly

th rate in core
ance entered in
ndent of any other

he total asset

w and outflow of

her than an output.

use their planning

) to forecast net
as long as the

he previous block.
uts in Column G.

tock issues are

stock repurchases
at the same level of
ollars). Ending

culated. The

Equity Multiplier.

hrough H30
ital, the result will
s this calculation

y funding to go
st likely cause of
ilities and capital
o correct this
(and asset) growth.

alt with and

nce your initial

ep in mind the

onship between

elationship between
s is purely an

nges in asset mix

of history are shown
t. No input is

Goals - Capital/Liquidity Plan

As of:

Institution: Your Bank Name Goes Here

12/31/2010

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

2015

Ending
NE Assets
-

2015

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

NE Assets/
Assets
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Loan Growth
Rate
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Ending
Loans

2015

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

Year
Dec-10
Dec-11
Dec-12

Core Growth
Rate
0.00%
0.00%
0.00%

Ending
Core

100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

Investments/
Ending
Year
Investments
Assets
Dec-10
0.00%
Dec-11
0.00%
Dec-12
0.00%
Dec-13
0.00%
Dec-14
0.00%
Dec-15
0.00%
Strat Goal
0.00%

2015

Ending
Assets
-

Asset
Growth
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

100.00%
80.00%
60.00%
40.00%

2015

Dec-13
Dec-14
Dec-15
Strat Goal

0.00%
0.00%
0.00%
0.00%
Oth Liab/
Assets
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Ending
Oth Liab
-

2015

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

Net
Income

2015

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

Return on
Assets
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Dividends/
Income
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Dividends
Paid
-

2015

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

End Capital/
Assets
0.00%

Avg Equity
Multiplier
-

20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

Year
Dec-10

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

2015

New Captl
(Buyback)
0
0
0
0
0

Ending
Lev Capital
-

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

2015

Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

Return on
Equity
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Year
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Strat Goal

NonNr Core/
Assets
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

2015

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

2015

Ending
NonNr Fnd
-

This worksheet is a product of FARIN & Associates.

2011 American Bankers Association, 1120 Connecticut Ave NW, Washington, DC 20036. All rights reserved.

Historical Inputs
Dec-08
Year End
Total Assets
Total Investments
Total Loans
Total Non-Earning Assets
Total Regulatory Core
Total Non- and Near-Core Funding
Total Other Liabilities
Total Capital
Net Income

Dec-09

Dec-10
-

Loan Growth Rate

Investments/Assets
NonEarn Assets/Assets
Regulatory Core Growth Rate
Non-Rgulatory Fund/Assets
Other Liab/Assets
Capital/Assets
ROA
Dividends/Income
ROE

0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Strategic Financial Goals

ROE
Capital/Assets
ROA
Dividends/Income
Organic Capital Growth
Loan Growth Rate
Investments/Assets
Non-Earning Assets/Assets
Core Funding Growth
Near- Non-Core Fund/Assets
Other Liab/Assets

Curr/Rct
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Goal
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Balanced

0.00%
0.00%
0.00%

0.00%

ROE Graph Data

2015
2014
0.00%
0.00%
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

ROA Graph Data

ROA vs Pe
2015
2014
ROA
0.00%
0.00%
Goal
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

Equity Mult
Equ Mult
Goal

Equity Multiplier Graph Data

2015
2014
2013
#DIV/0!
#DIV/0!
#DIV/0!

2012
#DIV/0!

2011
#DIV/0!

2010
#DIV/0!
#DIV/0!

2009
#DIV/0!
#DIV/0!

2008
#DIV/0!
#DIV/0!

Capital/Ass
C/A
Goal

Capital/Asset Graph Data

2015
2014
0.00%
0.00%
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

ROE vs Pe
ROE
Goal

Loan Growth Detail

2015
2014
Loan Grow
0.00%
0.00%
Goal
0.00%
0.00%

Dividend Growth Detail

2015
2014
2013
Div/Inc
0.00%
0.00%
0.00%
Goal
0.00%
0.00%
0.00%
Investments/Assets Detail
2015
2014
2013
Inv/Assets
0.00%
0.00%
0.00%
Goal
0.00%
0.00%
0.00%
Non-Earning Assets/Assets Detail
2015
2014
2013
NEA/Asset
0.00%
0.00%
0.00%
Gosl
0.00%
0.00%
0.00%

Core Dep Growth Rate

2015
2014
CoreD Gro
0.00%
0.00%
Goal
0.00%
0.00%
Other Liab/Assets
2015
2014
Oth Liab/A
0.00%
0.00%
Goal
0.00%
0.00%
Non-Core Fund/Assets
2015
2014
NC Fund/A
0.00%
0.00%
Goal
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

2013
0.00%
0.00%

2012
0.00%
0.00%

2011
0.00%
0.00%

2010
0.00%
0.00%

2009
0.00%
0.00%

2008
0.00%
0.00%

Retained Earnings/Income
2015
2014
2013
RE/Income 100.00%
100.00%
100.00%
Goal
100.00%
100.00%
100.00%

2012
100.00%
100.00%

2011
100.00%
100.00%

2010
100.00%
100.00%

2009
100.00%
100.00%

2008
100.00%
100.00%

2013

2012

2011

2010

2009

2008

Asset Growth Rate

2015
2014
Asset Growth
Goal

Asset Mix
2015
Investment
0.00%
Loans
100.00%
Non-Earnin
0.00%

2014
0.00%
100.00%
0.00%

2013
0.00%
100.00%
0.00%

2012
0.00%
100.00%
0.00%

2011
0.00%
100.00%
0.00%

2010
0.00%
100.00%
0.00%

2009
0.00%
100.00%
0.00%

2008
0.00%
100.00%
0.00%

Funding Mix
2015
Core Dep
100.00%
Non-Core
0.00%
Other
0.00%
Capital
0.00%

2014
100.00%
0.00%
0.00%
0.00%

2013
100.00%
0.00%
0.00%
0.00%

2012
100.00%
0.00%
0.00%
0.00%

2011
100.00%
0.00%
0.00%
0.00%

2010
100.00%
0.00%
0.00%
0.00%

2009
100.00%
0.00%
0.00%
0.00%

2008
100.00%
0.00%
0.00%
0.00%

ROE Tree
As of:

Institution: Your Bank Name Goes Here

12/31/2010
ROE
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

2013

2014

2015

#DIV/0!
ROA

Capital/Assets

100.00%
100.00%

80.00%

80.00%

60.00%

60.00%

40.00%

40.00%

20.00%

20.00%
0.00%

0.00%
2008

Growth
As of:

2009

2010

2011

2012

2013

2014

2008

2015

2009

2010

2011

2012

2013

2014

2015

2013

2014

2015

Institution: Your Bank Name Goes Here

12/31/2010
ROE

Dividends/Income

100.00%
100.00%

80.00%

80.00%

60.00%

60.00%

40.00%

40.00%

20.00%

20.00%
0.00%

0.00%
2008

2009

2010

2011

2012

2013

2014

2008

2015

2009

2010

2011

2012

Organic Capital Growth Rate = ROE * (1-Div/Income) = .00% * (100% - .00%) = .00% - Numbers are from goals
Loan Growth Rate

Core Deposit Growth Rate

100.00%

100.00%

80.00%

80.00%

60.00%

60.00%

40.00%

40.00%

20.00%

20.00%

100.00%

100.00%

80.00%

80.00%

60.00%

60.00%

40.00%

40.00%

20.00%

20.00%
0.00%

0.00%
2008

2009

2010

2011

2012

2013

Asset & Funding Mix

As of: 12/31/2010

2014

2008

2015

2009

2010

2011

2012

2013

2014

2015

Institution: Your Bank Name Goes Here

100%
80%
60%

NonEarning

40%

Loans

20%
0%
2008

2009

2010

2011

2012

2013

2014

2015

100%
80%
Capital

60%

Other

40%

NonCore

20%
0%
2008

2009

2010

This worksheet is a product of FARIN & Associates.

2011

2012

2013

2014

2015

 2011 American Bankers Association, 1120 Connecticut Ave NW, Washington, DC 20036. All rights reserved.

This worksheet is a product of FARIN & Associates.

2011 American Bankers Association, 1120 Connecticut Ave NW, Washington, DC 20036. All rights reserved.

The Basel III Liquidity Coverage Ratio (LCR) is a 30-day stress test. It asks that institutions maintain sufficient qual
- Causes an outflow of deposits
- Eliminates access to all forms of borrowed funds
- Causes a portion of unused credit lines to be drawn.
The LCR is calculated by dividing net qualifying assets by net cash outflows under the stress. The standard calls fo
we recommend you read the Liquidity Coverage Ratio sections of the Basel III International Framework for Liquidity
Click here to read the Basel III Liquidity release.
See page 9 of the PDF (or page 3 of the document) for the Liquidity Coverage Ratio.
Values displayed are for XYZ Bank, the case study institution in Tool 4 of the ABA Liquidity Toolbox.

The denominator in the

Net cash outflows will e
modeled is deposit outf
treated in the same man

Basel defines a small b

U.S. at the time of the c

Deposits are divided be

effective deposit insuran
transaction accounts wh
systems needed to sep

that are fully insured be

Total balances of non-m

for small business. Stre
minimum runoff factors

For CDs, balances matu

55 and 58 for small bus
withdrawal penalties no
Banking regulators will i
insurance programs. O
Column B to calculate a
displayed on Line 51 an

Large business balance

insured accounts with o
placed on Line 63. Unin

All unsecured debt due

Line 65. This is likely to
borrowings.

Secured wholesale fund

the source of the fundin
assets receive runoff fa
were pulled out of Leve
to borrowings, presuma
borrowings. The 0% an
numerator of the LCR c
deposits) should be pla

If the source of the colla

non-qualifying assets, a
non-qualifying collateral

Balances entered in Co
displayed in Column D.

The final group of outflo

commitments. This are
in Column C on Lines 7
a portion of their liquidit

The assumption (Colum

and that large business

100% of their liquidity lin

In the second major sec

component of this line is
down of these facilities.

Break down your unutili

The model will multiply
Net Outflow in Column

Total gross outflows of f

Net outflows of funds ar

(Rows 87-89) allows ba
funds inflows from these
100%. See the Basel II

Contractual loan repaym

An inflow percentage of
If the relationship is with
a balance weighted inflo

The Basel III Liquidity d

regulators will allow som
feel free to modify this a

Investment maturities a
cash flows from Level 1
numerator of the LCR.
incoming cash flows fro

There is a better case fo

count prepayments and
50%. Modify this perce
to debate this point with

Firm commitments from

Balances entered in Co
in Column D. Total Fac
inflows on Line 94 to 75

Total Net Outflows (Out

LCR calculation.

The results of the LCR

total of $11,770,770 of q
$3,026,629 short of hav
test. Their LCR Ratio is
The reasons for this sho
throughout the ABA Liqu

s maintain sufficient qualifying assets to cover net outflows of cash caused by a stress test that:

ss. The standard calls for this ratio to be at least 100%. Before completing this worksheet,
Framework for Liquidity Risk Measurement, Standards, and Monitoring.

This block is in the upper left corner of the LCR worksheet. It has two input areas, The name
of the institution is placed in Cell A1. The As of date of the date is placed in Cell E1. These
two input items are strictly used for display purposes. The operation of the spreadsheet
is not dependent on either of these two inputs.

The Basel III Liquidity document classifies assets into three categories, Level 1, Level 2, and
non-qualifying. Level 1 assets are generally those that qualify for a 0% risk weight under
Basel II capital standards. They are generally cash, reserves at the Federal Reserve
and fully guaranteed US government obligations. It is unclear whether various forms of Fed Funds
sold meet the definition of Level 1. The definition implies that GSA securities don't meet the Level 1
tests because of their risk weight (20%) although they would appear to meet all the other criteria.
In qualifying Level 1 assets, there is no haircut applied to these securities, thus the 100% Factor
in Column B. Enter total market value of Level 1 securities in Column C. Then enter the portion
of these balances that are pledged as collateral in Column D. The model will calculate the Net Of
Pledged balances in Column E, then take the Column E balances and multiply them by the
Factor in Column B to calculate Factored Net Qualifying balances in Column F. Balances
in Columns C through F are summed on Line 15. Lines 13 and 14 are available to add securities
qualifying Level 1 assets that don't fit into the categories on Lines 11 and 12.

Level 2 assets include securities that carry a 20% risk weight under Basel II risk based capital
standards. A line for 20% risk weight Fed Funds is included although it is unclear how the
US regulators will treat these assets. GSE paper also appears to meet the Level 2 definition
although GSE paper meets all the other criteria for Level 1 other than risk weight. This category
also includes corporate paper rated AA- or above. We assumed that Municipal Bonds with a
similar rating would qualify for Level 2. Whether that assumption is valid remains to be seen.
Level 2 assets receive a 15% haircut, resulting in an 85% factor in Column B. Market value

of balances are entered in Column C. The portion that is pledged is entered in Column D.
Balances Net of Pledged are calculated by the model in Column E, them multiplied by the factor
in Column B to calculate Factored Net Qualifying in Column F. Totals for Columns C through F
are calculated and displayed on Line 26. A line has been provided to add an additional asset
to this list if needed.
The Basel III LCR limits Level 2 assets to 40% of the qualifying asset total. We have elected to
not enforce this provision for the time being because:
- US banking regulators have not released any document finalizing asset classifications for US
banks.
- The international phase-in date for these standards is 2015. There is plenty of time to
restructure investment portfolios prior to that date if needed.
- Most community bank investment portfolios are biased in the direction of GSE securities and
municipal bonds. Enforcing this standard could trigger significant shifts in investment portfolios
at a significant cost to investment yield.

Annex I to the Basel III Liquidity document doesn't have a section for non-qualifying securities in
its layout. We decided to include a Section C for two reasons:
- We wanted to identify a number of security categories commonly found on community bank
balance sheets that we feel do not meet the Level 1 or Level 2 tests. Their classification in
this section is based on our judgment and may change when implemented by US banking
regulators.
- We wanted to provide a total you could use to foot to your general ledger totals for cash and
due from and securities.
Any balances entered in Section C receive a 100% haircut or the 0% factor shown in Column B.
Total market values of these securities are entered in Column C. The pledged portion is
entered in Column D. Balances net of pledged are calculated and displayed in Column E, which
is multiplied by the Column B factor in displaying Factored Net Qualifying in Column F. Totals for
Columns C through F for non-qualifying securities are displayed in row 37. Totals for sections
A, B, and C are displayed on Line 38. The Factored Net Qualifying total (Column F Line 38)
is the numerator of the LCR calculation.

The denominator in the Basel III LCR is net cash outflows occurring in 30 days as a result of the stress test.
Net cash outflows will equal total cash outflows less cash inflows. The first form of cash outflows being
modeled is deposit outflows from retail customers (consumers) and small businesses. Both groups are
treated in the same manner.
Basel defines a small business as one with deposits of less than 1 million Euros, equivalent to roughly $1.3 million
U.S. at the time of the calculations.
Deposits are divided between stable and less stable. Stable deposits are defined as those covered by an
effective deposit insurance scheme and where there is an established relationship with the bank or for
transaction accounts where it is the customers' primary operating account. Most institutions lack the
systems needed to separate balances based on relationships so for now we are recommending that deposits

that are fully insured be considered stable and those not fully insured, less stable.
Total balances of non-maturity deposits are placed in Column C on Lines 45 and 48 for retail and 54 and 57
for small business. Stressed runoff factors for each line are displayed in Column B. These factors are the
minimum runoff factors called for in the Basel III LCR.
For CDs, balances maturing in the next 30 days would be placed in Column C in Lines 46 and 49 for retail and
55 and 58 for small business. However the Basel III LCR instructions indicate that should effective early
withdrawal penalties not be in place, all the CD balances should be included. It remains to be seen how U.S.
Banking regulators will interpret this Basel directive given the long-standing nature of effective U.S. deposit
insurance programs. Once balances have been entered in Column C, balances are multiplied by Factors in
Column B to calculate and display Factored Net Outflows in Column D. Totals for retail deposits are
displayed on Line 51 and for small business deposits on Line 60.

Large business balances are placed on Lines 62, 63, or 64. Place fully insured deposits on Line 62. Not fully
insured accounts with operating relationships (funds specifically needed for operational purposes) should be
placed on Line 63. Uninsured deposits without and operating relationship go on Line 64.
All unsecured debt due within the next 30 days from other than large business customers is placed on
Line 65. This is likely to include unsecured Fed Funds purchased, brokered CDs, and other unsecured
borrowings.
Secured wholesale funding is classified on Lines 68 through 71 based on the nature of collateral pledged and
the source of the funding. Borrowings coming due in the next 30 days collateralized by Level 1 or Level 2
assets receive runoff factors of 0% or 15% respectively. Why so low? Investments pledged as collateral
were pulled out of Level 1 and Level 2 assets earlier. To the extent Level 1 and Level 2 assets were pledged
to borrowings, presumably the institution is in a position to liquidate the assets to fund the outflow of
borrowings. The 0% and 15% factors are the same as those used as haircuts on the unpledged assets in the
numerator of the LCR calculation. Large deposits fully backed by pledged collateral (typically governmental
deposits) should be placed in this area.
If the source of the collateralized borrowings is the Federal Reserve and the borrowings are backed by
non-qualifying assets, a 25% haircut is presumed (Line 70). All other collateralized borrowings backed by
non-qualifying collateral receive a 100% factor (must be fully funded from liquidity).
Balances entered in Column C are multiplied by the factors in Column B with the Factored Net Outflow
displayed in Column D. Totals for Section B2 are displayed on Line 66 and Section C on Line 72.

The final group of outflows under the Basel III LCR test (Part D) is the draw downs of unused credit
commitments. This area breaks down into two major sections. Undrawn credit commitments are entered
in Column C on Lines 75 through 78. The theory is that firms recognizing the bank is in trouble will monetize
a portion of their liquidity facilities to insure funds will be available if needed.
The assumption (Column B) is that retail and small business clients will draw down 5% of their lines
and that large businesses will draw down 10% of their credit lines. Large businesses will also draw down

100% of their liquidity lines. Other legal entities will draw down 100% of available lines.
In the second major section, firm commitments to originate are entered in Column C on Line 79. The biggest
component of this line is likely to be firm commitments to originate mortgages and assumes 100% draw
down of these facilities.
Break down your unutilized credit commitments by category and enter balances in Column C.
The model will multiply balances entered in Column C by the factor in Column B to compute the Factored
Net Outflow in Column D. Additional cash flows resulting from line utilization are totaled on Line 80.
Total gross outflows of funds from Sections A, B1, B2, C and D are displayed on Line 81.

Net outflows of funds are calculated by subtracting cash inflows from outflows. The first section
(Rows 87-89) allows balances of reverse repos or security borrowings to be entered. Assumptions as to
funds inflows from these transactions are based on the level of collateral pledged and ranges from 0% to
100%. See the Basel III Liquidity document for more detail on these transactions.
Contractual loan repayments in the next 30 days (maturity and amortization) are entered on Line 90.
An inflow percentage of 50% is assumed for retail, small business, and large business customers.
If the relationship is with another financial institution, 100% inflow is assumed. Should you have both,
a balance weighted inflow percentage is used.
The Basel III Liquidity document is silent as to expected loan prepayments. It is unclear whether US banking
regulators will allow some percentage of anticipated prepayments to be counted. We set the factor at 0% but
feel free to modify this assumption of you are inclined to debate this issue with your regulator.
Investment maturities and amortization should be entered on Line 92. To avoid double counting, exclude
cash flows from Level 1 and Level 2 investments as their cash flows have already been recognized in the
numerator of the LCR. The initial setting assumes 100% recognition of the cash flows entered. If you feel
incoming cash flows from some of your non-qualifying assets are at risk, this percentage should be lowered.
There is a better case for recognizing normal levels of prepayments on investments than loans. Again, only
count prepayments and calls on non-qualifying investments. The Factor in the spreadsheet is initially set at
50%. Modify this percentage based on your knowledge of your investment portfolios and your willingness
to debate this point with your regulator.
Firm commitments from others to receive sold loans should be entered on Line 94.
Balances entered in Column C are multiplied by the Factors in Column B to calculate Factored Net Inflows
in Column D. Total Factored Net Inflows are summed in row 95. Note that the BASEL III LCR section limits
inflows on Line 94 to 75% of total outflows on Line 81. This test is incorporated in and enforced by this model.
Total Net Outflows (Outflows less Inflows) is displayed on Line 96. This is the denominator of the LCR
LCR calculation.

The results of the LCR calculation are displayed in the top left corner of the worksheet. XYZ Bank has a
total of $11,770,770 of qualifying assets (Line 38). Net cash outflows are $14,204,399 (Line 96). They fall
$3,026,629 short of having enough qualifying assets to fund their 30 day net outflows under this stress
test. Their LCR Ratio is 78.7%, well under the 100% minimum spelled out in the Basel III LCR section.
The reasons for this shortfall and the actions being taken by XYZ to correct this shortfall are discussed
throughout the ABA Liquidity Toolbox.

as, The name

ll E1. These

Level 2, and

orms of Fed Funds

on't meet the Level 1
the other criteria.

the 100% Factor

enter the portion
alculate the Net Of
hem by the
to add securities

based capital

el 2 definition
ht. This category
Bonds with a
ns to be seen.

Market value

ied by the factor

ns C through F
ditional asset

have elected to

sifications for US

E securities and
vestment portfolios

ying securities in

ommunity bank
lassification in
y US banking

als for cash and

wn in Column B.

Column E, which
umn F. Totals for
ls for sections
mn F Line 38)

Your bank name goes here

Liquidity Coverage Ratio
Numerator (Net High Quality Liquid Assets)
Denominator (Net Cash Outflows)
Item
Stock of High Quality Liquid Assets
A. Level 1 Assets
Cash & Due From Banks
Available Fed Reserves
Treasuries & Fully Guaranteed Agencies
.
.
Total Level 1
B. Level 2 Assets
Fed Funds Sold/FHLB Overnight
GSE Bonds
Corporate Bonds >= AACovered Bonds >= AACommercial Paper
Municipal Bonds >=AAGSE MBS Pass-Throughs
GSE CMO
.
Total Level 2
C. Non-Qualifying Securities
Trust Preferred Securities
Bank CDs - Fully Insured
Non-Qual Comm Paper and Corp Bonds
Non-Qual Municipal Bonds
Bank Issued Assets
GSE Stock
Asset-Backed Securities >= AAPrivate Label MBS >= AA.
Total Non-Qualifying
Overall Total Cash, Reserves, Securities
Item
Cash Outflows
A. Retail Deposits
Stable Deposits
Non-Maturity Deposits
CDs < 30-Day Maturity
Less Stable Deposits
Non-Maturity Deposits
CDs < 30-Day Maturity
CDs > 30-Day Maty with Suff Penalties
Total Retail Deposits
B1. Unsecured Wholesale - Small Busns
Stable Deposits

0.0%
Factor

Total

As of:
Target Ratio
Excess(Short)

Pledged

12/31/10
100.0%
-

Net of
Pledged

100%
100%
100%
100%
100%

85%
85%
85%
85%
85%
85%
85%
85%
85%

0%
0%
0%
0%
0%
0%
0%
0%
0%

Factor

Total

Factored
Net Outflow

5%
5%

10%
10%
0%

Non-Maturity Deposits
CDs < 30 Day Maturity
Less Stable Deposits
Non-Maturity Deposits
CDs < 30-Day Maturity
CDs > 30-Day Maty with Suff Penalties
Total Small Business Deposits
B2. Unsec Wholesale Funding - Other
Non-Fin Corp covered by dep insurance
Non-Fin Corp with operating relshps
Non-Financial Corps w/o Oper Rel
Unsecured Debt - Other
Total Unsecured - Other
C. Secured Wholesale Funding
Backed by Level 1 Assets
Backed by level 2 Assets
Fed Reserve - Backed by Non-Qual
Other Secured
Total Secured Wholesale Funding
D. Additional Requirements
Undrawn portion of credit/liq facilities
Retail and small business Clients
Non-financial corporates - credit
Non-financial corporates - liquidity
Other legal entity - credit and liquidity
Firm commitments to originate
Total Additional Requirements
Total Outflows
Item
Cash Inflows:
Reverse Repos or Security Borrowings
Level 1 Collateral
Level 2 Collateral
Other Collateral
Contractual Loan Repayments
Expected Loan Prepayments
Contractual Investment Matys & Repmts
Expected Investment Prepay/Calls
Firm Commitments To Sell Loans
Total Inflows (max 75% of outflows)
Total Net Outflows (Outflow less Inflow)

5%
5%

10%
10%
0%

5%
25%
25%
100%

0%
15%
25%
100%

5%
10%
100%
100%
100%

Factor

0%
15%
100%
50%
0%
100%
50%
100%

Total

Factored
Net Inflow

This worksheet is a product of FARIN & Associates.

2011 American Bankers Association, 1120 Connecticut Ave NW, Washington, DC 20036. All rights reserved.

Factored Net
Qualifying