Morgan Stanley 2015 Annual Report Download - page 84

• Discretionary unsecured debt buybacks;
• Drawdowns on lending 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.
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 and that 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, 2015 and December 31, 2014, 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 Required Liquidity Framework 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, regional and segment liquidity requirements, regulatory requirements and
collateral requirements. In addition, the Company’s Global Liquidity Reserve includes a discretionary surplus based on risk
tolerance and is subject to change dependent on market and firm-specific events. The Global Liquidity Reserve is held within
the Parent and its major operating subsidiaries.
Global Liquidity Reserve by Type of Investment.
At December 31, 2015 At December 31, 2014
(dollars in millions)
Cash deposits with banks ................................................ $ 10,187 $ 12,173
Cash deposits with central banks .......................................... 39,774 29,607
Unencumbered highly liquid securities:
U.S. government obligations ......................................... 72,265 76,555
U.S. agency and agency mortgage-backed securities ...................... 37,678 32,358
Non-U.S. sovereign obligations(1) .................................... 28,999 25,888
Investments in money market funds ................................... — 277
Other investment grade securities ..................................... 14,361 16,311
Global Liquidity Reserve ........................................ $ 203,264 $ 193,169
(1) Non-U.S. sovereign obligations are composed of unencumbered German, French, Dutch, U.K., Brazilian and Japanese government obligations.
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