In this Liquidity Coverage Ratio ("LCR") Disclosure ("Disclosure"), references to "our," "we," "us," "BNY Mellon," the "Company" and similar terms refer to The Bank of New York Mellon Corporation and its consolidated subsidiaries. References in this Disclosure to "Parent" refer to The Bank of New York Mellon Corporation on a standalone basis. This Disclosure should be read in conjunction with the section titled "Forward-looking Statements" below.
Established in 1784 by Alexander Hamilton, we were the first company listed on the New York Stock Exchange (NYSE: BK). With a more than 230-year history, BNY Mellon is a global company that manages and services assets for financial institutions, corporations and individual investors in 35 countries.
United States regulators have established an LCR that requires certain banking organizations, including BNY Mellon, to maintain a minimum amount of unencumbered high quality liquid assets ("HQLA") sufficient to withstand the net cash outflow under a hypothetical standardized acute liquidity stress scenario for a 30-day time horizon. The eligible HQLA amount is the numerator and the total net cash outflow amount is the denominator of the LCR. The LCR caps cash inflows at 75% of cash outflows and requires an add-on calculation based on the difference between the net cumulative outflow amounts on the peak day and the last day of the 30-day period to address potential maturity mismatches between outflows and inflows. The U.S. regulators have affirmed the principle that HQLA is expected to be available for use to address liquidity needs in a time of stress.
The U.S. LCR rule requires BNY Mellon and each of our affected domestic bank subsidiaries to meet an LCR of at least 100%. The LCR of BNY Mellon and each of our affected domestic bank subsidiaries was compliant with the U.S. LCR requirements for the second quarter of 2019.
In addition, BNY Mellon is subject to the Federal Reserve's Enhanced Prudential Standards, which include liquidity standards. BNY Mellon has taken actions to comply with these standards, including the adoption of various liquidity management standards and maintenance of a liquidity buffer of unencumbered highly liquid assets based on the results of internal liquidity stress testing.
In December 2016, the Federal Reserve Board issued a final rule (the "U.S. LCR Disclosure rule") requiring that large banking organizations, including BNY Mellon, publicly disclose certain quantitative
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liquidity metrics as set forth herein, as well as qualitative factors affecting their LCR results. Accordingly, we have developed this Disclosure, which contains the required public disclosures prepared in accordance with the U.S. LCR Disclosure rule and covering the period beginning on April 1, 2019 and ending on June 30, 2019. This Disclosure will remain publically available for at least 5 years. The U.S. LCR Disclosure rule requires us to present certain components of HQLA, cash inflows, and cash outflows on both a weighted and an unweighted basis. With respect to HQLA, weighted basis refers to the application of haircuts and caps applicable to otherwise eligible HQLA; unweighted basis refers to HQLA before application of such haircuts and caps. With respect to cash inflows and outflows, weighted basis refers to the application of specified inflow and outflow rates applicable to certain types of cash inflows and outflows; unweighted basis refers to inflows and outflows before the application of such rates. Averages are calculated as simple averages of daily amounts over the calendar quarter.
Any differences between the presentation of information in this Disclosure and how we present such information for other purposes are solely due to our efforts to comply with applicable regulation. The information presented in this Disclosure does not, in any way, reflect changes to our organizational structure, business plans or practices, or strategy.
Additional financial and other information about BNY Mellon and its principal business activities can be found in its 2018 Annual Report on Form 10-K ("2018 Annual Report"), Quarterly Reports on Form 10-Q("10-Q") and other filings, collectively referred to as "SEC Filings", with the Securities and Exchange Commission, which we make available on the Investor Relations section of our corporate website at www.bnymellon.com.
The Bank of New York Mellon Corporation
Quarterly Variance in the LCR
For the second quarter of 2019, BNY Mellon's average LCR was 117%, with average weighted HQLA holdings of $118.2 billion and an average weighted net cash outflow of $100.9 billion. Our average weighted eligible HQLA and average net cash outflow both increased in the second quarter 2019 compared to the first quarter. The second quarter 2019 average LCR decreased from the first quarter average LCR of 118% principally due to changes in the levels and composition of customer deposits as well as a long term debt maturity. We expect our average LCR to vary from period to period due to business-as-usual fluctuations in our client activity, business mix and the overall market environment. Please see below for more information regarding the components of our LCR.
Drivers of the LCR
Deposits are the key driver of our LCR. BNY Mellon provides custody, cash management and clearing services to a wide range of clients, including banks, broker dealers, other non-bank financial institutions, corporations, and individuals. These services are primarily operational and generate substantial deposit balances. Client deposits are the main funding source for BNY Mellon and are the main component of weighted outflow in the LCR. The HQLA BNY Mellon holds is adequate to cover assumed deposit outflows, as well as other cash outflows, under the hypothetical LCR liquidity stress. Pursuant to its liquidity management practices described below, BNY Mellon has also established internal limits to monitor depositor concentration risk.
For the second quarter of 2019, BNY Mellon's total eligible average weighted HQLA was $118.2 billion. BNY Mellon held an average weighted balance of eligible level 1 HQLA of $101.3 billion, which was mainly composed of deposits with central banks, U.S. Treasury securities, and securities issued or guaranteed by non-U.S. sovereigns. BNY Mellon held an average weighted balance of $16.9 billion of eligible level 2 HQLA, the majority of which consisted of U.S. agency mortgage-backed securities.
Cash Outflow Amounts
For the second quarter of 2019, the average weighted cash outflow was $136.2 billion.
Average weighted retail funding outflow was $5.5 billion, 44% of which consisted of other retail funding outflow, which included less stable retail deposits and broker-dealer retail customer cash. Stable retail deposit outflow and brokered deposit outflow comprised the remaining 56% of retail funding outflow.
Average weighted unsecured wholesale funding outflow was $107.0 billon. Approximately 62% of average unweighted unsecured wholesale funding outflow was operational deposits with low outflow rates; 37% was non-operational funding outflow, with high outflow rates, primarily consisting of non- operational deposits, broker-dealer wholesale customer cash and Fed funds purchased. Operational deposit outflow and non-operational funding outflow comprised approximately 97% of average weighted unsecured wholesale funding outflows. Unsecured debt outflow made up the remaining 3%.
Average weighted secured wholesale funding outflow was $11.1 billion, the majority of which was from repurchase agreements and customer shorts in our broker-dealer subsidiaries.
Average weighted outflow from credit and liquidity facilities was $8.7 billion, most of which were from committed credit facilities.
The remaining average weighted outflow of $3.9 billion was mainly related to derivative exposures and other collateral requirements.
Cash Inflow Amounts
For the second quarter of 2019, the average weighted cash inflow was $36.2 billion.
Average weighted secured lending transaction inflow was $24.9 billion, the majority of which was from reverse repurchase agreements and margin loans collateralized with non-HQLA assets in our broker- dealer subsidiaries.
Average weighted unsecured wholesale cash inflow was $7.7 billion, mainly from commercial loans. The remaining average weighted inflow of $3.6 billion consisted primarily of broker-dealer segregated account inflows.
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The Bank of New York Mellon Corporation
Calculation and Components of our LCR
The table below provides information about our calculation and components of the LCR as required by the U.S. LCR Disclosure rule.
Liquidity Coverage Ratio
April 1, 2019 to June 30, 2019
High-Quality Liquid Assets (b)
Total eligible high-quality liquid assets (HQLA), of which:
Eligible level 1 liquid assets
Eligible level 2A liquid assets
Eligible level 2B liquid assets
Cash Outflow Amounts
Deposit outflow from retail customers and counterparties, of which:
Stable retail deposit outflow
Other retail funding outflow
Brokered deposit outflow
Unsecured wholesale funding outflow, of which:
Operational deposit outflow
Non-operational funding outflow
Unsecured debt outflow
Secured wholesale funding and asset exchange outflow
Additional outflow requirements, of which:
Outflow related to derivative exposures and other collateral requirements
Outflow related to credit and liquidity facilities including unconsolidated
structured transactions and mortgage commitments
Other contractual funding obligation outflow
Other contingent funding obligations outflow
Total Cash Outflow
Cash Inflow Amounts
Secured lending and asset exchange cash inflow
Retail cash inflow
Unsecured wholesale cash inflow
Other cash inflows, of which:
Net derivative cash inflow
Securities cash inflow
Broker-dealer segregated account inflow
Other cash inflow
Total Cash Inflow
HQLA Amount (b)
Total Net Cash Outflow Amount Excluding the Maturity Mismatch Add-on
Maturity Mismatch Add-on
Total Net Cash Outflow Amount
Liquidity Coverage Ratio (%)
The amounts reported in this column may not equal the calculation of those amounts using component amounts reported in rows 1 - 28 due to technical factors such as the application of the level 2 liquid asset caps, the total inflow cap, and for depository institution holding companies subject to subpart G of the U.S. LCR rule, the application of the modification to total net cash outflows.
HQLA excludes excess liquidity held at certain subsidiaries that is not transferable within the Company.
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The Bank of New York Mellon Corporation published this content on 12 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 August 2019 20:21:03 UTC