Liquidity Reservations
Liquidity Reservations ensure customers have access to a set level of funds, providing a safety net for their liquidity needs.
If the demand for liquidity is high, there may not be sufficient liquidity in the MasterPool to fulfil a customer’s liquidity request. This situation can pose problems for customers who rely on our liquidity to meet their business requirements. To address this issue, customers have the option to request a ‘liquidity reserve’, typically in exchange for more favourable commercial terms.
A liquidity reserve ensures that a customer always has access to a specific level of liquidity. When a liquidity reserve is established with a customer, liquidity is moved out of the MasterPool and into a Reserve. The reserve keeps track of the amount of liquidity reserved for a borrower and the portion of their liquidity reserve that the borrower is currently utilizing.
Liquidity Request with Reserve
When a customer with a liquidity reserve requests liquidity, the reserve will transfer the necessary amount of liquidity into the MasterPool to fulfil the request. If the liquidity reserve does not have sufficient liquidity to fulfil the request, the remaining required liquidity will be sourced from the MasterPool, provided there is enough liquidity available. Let’s take an example: If a customer has a credit limit of $10 million and a liquidity reserve of $5 million, and they make a liquidity request of $7 million, the liquidity reserve will transfer $5 million into the MasterPool. The MasterPool will then use an additional $2 million of its own funds to meet the total liquidity request of $7 million.
When a customer with a liquidity reserve makes a liquidity repayment, the liquidity reserve is automatically replenished. In the previous example, a full repayment would involve transferring $5 million back into the liquidity reserve, ensuring its availability for future liquidity requests. If a customer wishes to reduce the size of their liquidity reserve, the reserve will transfer liquidity back into the MasterPool, making it available to fulfil general liquidity requests.
Last modified 23d ago