Morgan Stanley 2014 Annual Report Download - page 103

• Discretionary unsecured debt buybacks;
• Drawdowns on unfunded commitments provided to third parties;
• Client cash withdrawals and reduction in customer short positions that fund long positions;
• Limited access to the foreign exchange swap markets; and
• Maturity roll-off of outstanding letters of credit with no further issuance.
The Liquidity Stress Tests are produced for the Parent and major operating subsidiaries, as well as at major
currency levels, to capture specific cash requirements and cash availability across the Company, including a
limited number of asset sales in a stressed environment. The Liquidity Stress Tests assume that subsidiaries will
use their own liquidity first to fund their obligations before drawing liquidity from the Parent. The Parent will
support its subsidiaries and will not have access to subsidiaries’ liquidity reserves. In addition to the assumptions
underpinning the Liquidity Stress Tests, the Company takes into consideration the settlement risk related to
intraday settlement and clearing of securities and financing activities.
At December 31, 2014 and December 31, 2013, the Company maintained sufficient liquidity to meet current and
contingent funding obligations as modeled in its Liquidity Stress Tests.
Global Liquidity Reserve.
The Company maintains sufficient liquidity reserves (“Global Liquidity Reserve”) to cover daily funding needs
and to meet strategic liquidity targets sized by the CFP and Liquidity Stress Tests. The size of the Global
Liquidity Reserve is actively managed by the Company. The following components are considered in sizing the
Global Liquidity Reserve: unsecured debt maturity profile, balance sheet size and composition, funding needs in
a stressed environment inclusive of contingent cash outflows and collateral requirements. In addition, the
Company’s Global Liquidity Reserve includes an additional reserve, which is primarily a discretionary surplus
based on the Company’s risk tolerance and is subject to change dependent on market and firm-specific events.
The Company’s Global Liquidity Reserve is held within the Parent and its major operating subsidiaries. The
Company’s Global Liquidity Reserve is composed of diversified cash and cash equivalents and unencumbered
highly liquid securities. Eligible unencumbered highly liquid securities include U.S. government securities, U.S.
agency securities, U.S. agency mortgage-backed securities, non-U.S. government securities and other highly
liquid investment grade securities.
Global Liquidity Reserve by Type of Investment.
The table below summarizes the Company’s Global Liquidity Reserve by type of investment:
At
December 31,
2014
At
December 31,
2013
(dollars in billions)
Cash deposits with banks ................................................ $ 12 $ 18
Cash deposits with central banks .......................................... 30 36
Unencumbered highly liquid securities:
U.S. government obligations ......................................... 76 84
U.S. agency and agency mortgage-backed securities ...................... 32 23
Non-U.S. sovereign obligations(1) .................................... 26 23
Investments in money market funds ................................... 1 1
Other investment grade securities ..................................... 16 17
Global Liquidity Reserve ........................................ $193 $202
(1) Non-U.S. sovereign obligations are composed of unencumbered German, French, Dutch, U.K., Brazilian and Japanese government
obligations.
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