Morgan Stanley 2015 Annual Report Download - page 85

Global Liquidity Reserve Managed by Bank and Non-Bank Legal Entities.
At December 31, 2015 At December 31, 2014
Average Balance(1)
2015 2014
(dollars in millions)
Bank legal entities:
Domestic ............................ $ 88,432 $ 82,484 $ 81,691 $ 81,874
Foreign .............................. 5,896 5,460 5,097 5,366
Total Bank legal entities ............ 94,328 87,944 86,788 87,240
Non-Bank legal entities(2):
Domestic ............................ 74,811 70,122 72,115 75,499
Foreign .............................. 34,125 35,103 34,133 31,934
Total Non-Bank legal entities ........ 108,936 105,225 106,248 107,433
Total ........................ $ 203,264 $ 193,169 $ 193,036 $ 194,673
(1) The Company calculates the average Global Liquidity Reserve based upon daily amounts.
(2) The Parent managed $54,810 million and $55,094 million at December 31, 2015 and December 31, 2014, respectively, and averaged $53,620 million and
$56,501 million during 2015 and 2014, respectively.
Regulatory Liquidity Framework.
The Basel Committee on Banking Supervision (the “Basel Committee”) has developed two standards intended for use in
liquidity risk supervision: the Liquidity Coverage Ratio (“LCR”) and the Net Stable Funding Ratio (“NSFR”).
Liquidity Coverage Ratio.
The LCR was developed to ensure banking organizations have sufficient high-quality liquid assets to cover net cash outflows
arising from significant stress over 30 calendar days. This standard’s objective is to promote the short-term resilience of the
liquidity risk profile of banking organizations.
The final rule to implement the LCR in the U.S. (“U.S. LCR”) applies to the Company and its U.S. Bank Subsidiaries and
each is required to calculate its respective U.S. LCR on each business day. As of January 1, 2015, the Company and its U.S.
Bank Subsidiaries were required to maintain a minimum U.S. LCR of 80%. Beginning on January 1, 2016, the Company and
its U.S. Bank Subsidiaries are required to maintain a minimum U.S. LCR of 90%, and this minimum standard will reach the
fully phased-in level of 100% beginning on January 1, 2017. In addition, the Federal Reserve has proposed rules that would
require large banking organizations, including the Company, to publicly disclose certain qualitative and quantitative
information about their U.S. LCR beginning in the third quarter of 2016. The Company is compliant with the minimum
required U.S. LCR based on current interpretation and continues to evaluate its impact on the Company’s liquidity and
funding requirements.
Net Stable Funding Ratio.
The objective of the NSFR is to reduce funding risk over a one-year horizon by requiring banking organizations to fund their
activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. In October 2014, the
Basel Committee finalized revisions to the NSFR. The U.S. banking regulators are expected to issue a proposal to implement
the NSFR in the U.S. The Company continues to evaluate the NSFR and its potential impact on the Company’s current
liquidity and funding requirements.
Funding Management.
The Company manages its funding in a manner that reduces the risk of disruption to the Company’s operations. The
Company pursues a strategy of diversification of secured and unsecured funding sources (by product, by investor and by
region) and attempts to ensure that the tenor of its liabilities equals or exceeds the expected holding period of the assets being
financed.
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