EC, published in the Official Journal of the European Union, the Delegated Regulation (EU) 2018/1620 on liquidity coverage requirement for credit institutions. This regulation amends Delegated Regulation (EU) 2015/61 to supplement the Capital Requirements Regulation (No 575/2013). The changes are intended to improve alignment with international standards and facilitate more efficient liquidity management by credit institutions. The regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. It shall apply from April 30, 2020.
The regulation stipulates that, to take adequate account of activities carried out by credit institutions active outside EU, any requirement for a minimum issue size applying to liquid assets held by a subsidiary undertaking in a third country should be waived, so that such assets can be recognized for consolidation purposes. Otherwise, the parent institution could suffer a shortfall in liquid assets at consolidated level since the liquidity requirement arising from a subsidiary in a third country would be included in the consolidated liquidity requirement while the assets held by that subsidiary to fulfill its liquidity requirement in the third country would be excluded from the consolidated liquidity requirement. However, the assets of the subsidiary undertaking in a third country should only be recognized up to the level of the stressed net liquidity outflows incurred in the same currency as the currency in which the assets are denominated and arising from that particular subsidiary. Moreover, as for any other third-country assets, the assets should only be recognized if they qualify as liquid assets under the national law of the third country in question.
In addition, the treatment of outflow and inflow rates for repurchase agreements (repos), reverse repurchase agreements (reverse repos), and collateral swaps should be fully aligned with the approach in the international standard for the liquidity coverage ratio set by BCBS. Specifically, the cash outflows calculation should be directly linked to the prolongation rate of the transaction (aligned with the haircut on the collateral provided applied to the cash liability, as in the BCBS standard) rather than to the liquidity value of the underlying collateral.
Related Link: Regulation (EU) 2018/1620
Effective Date: November 19, 2018
Keywords: Europe, EU, Banking, LCR, Liquidity Risk, CRR, Regulation 2018/1620, EC
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.