EBA published an Opinion following the notification by the Central Bank of Cyprus (CBC) of its intention to apply stricter liquidity requirements to address an increase in macro-prudential risk, based on Article 458 of the Capital Requirements Regulation (CRR). EBA welcomes the intention of CBC to closely monitor the gradual release of liquidity and liquidity positions of Cypriot banks and to take any necessary actions in the future.
CBC notified EBA of its intention to tighten some elements in the calculation of the liquidity coverage ratio (LCR), in the form of an add-on, by setting stricter inflow and outflow rates than those defined in the Commission Delegated Regulation (EU) 2015/61 on liquidity coverage requirement for credit Institutions. The objective of the measure is to ensure that from January 01, 2018 there is a gradual release of the excess liquidity stemming from the lower liquidity requirements envisaged by the fully phased-in LCR, compared to the current liquidity requirements in force in Cyprus. In its Opinion, addressed to the European Council, EC, and CBC, EBA acknowledges the changes in the intensity of macro-prudential or systemic risks in the Cypriot economy as well as the potential threat to financial stability that could result from a sudden release of excess liquidity.
Keywords: Europe, EU, Banking, CRR, LCR, Liquidity Risk, Systemic Risk, Macroprudential Risk, EBA
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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