EBA Report Confirms Solid Liquidity Position of Banks in EU
EBA published a report that monitors and evaluates the liquidity coverage requirements in place in EU. The report shows that EU banks have continued to improve their liquidity coverage ratio (LCR). This trend continued at the end of June 2020, even if the COVID-19 crisis had an impact on liquidity positions of banks. At the end of June 2020, EU banks' average LCR stood at 166% and no bank reported LCR levels below the minimum threshold of 100%.
The report highlights that access to additional liquidity via extraordinary central bank facilities supported efforts of EU banks to maintain their LCR buffers. A more in-depth analysis of the potential currency mismatches in LCR levels revealed that EU banks tend to hold materially lower liquidity buffers in some foreign currencies, in particular USD. The report also highlights that the activation of foreign-exchange swap lines among major central banks in the first semester of 2020 helped mitigate stress in the foreign-exchange funding markets and contributed to an improvement in EU banks’ foreign currency LCRs. Results of the report on liquidity measures have been presented separately for global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) and other banks (non G-SIIs or O-SIIs).
Related Link: Press Release
Keywords: Europe, EU, Banking, LCR, COVID-19, Liquidity Risk, Basel, Liquidity Buffer, EBA
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