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    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    May 23, 2022

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR). The European Systemic Risk Board (ESRB) also published Recommendation ESRB/2022/3 on the reciprocation of macro-prudential measures in Belgium, France, Lithuania, Luxembourg, Netherlands, Norway, and Sweden. In addition, the European Central Bank published the template for calculating the interest rates applicable to repayments at maturity or voluntary repayment of the third series of targeted longer-term refinancing operations (TLTRO III).

    Liquidity Coverage Requirements

    Regulation 2022/786 is amending the Regulation 2015/61 to supplement CRR with regard to the liquidity coverage requirement for credit institutions. Regulation 2015/61 is being amended to better allow the credit institutions issuing covered bonds to comply with the general liquidity coverage requirement for a 30 calendar day stress period and with the cover pool liquidity buffer requirement of holding liquid assets to cover net liquidity outflows over the next 180 days. To clarify some of the existing rules and to align the text of Regulation 2015/61 with the definitions laid down in the CRR and the Covered Bonds Directive (2019/2162), some additional changes were needed. The new regulation is introducing a new amendment to the encumbrance criterion under the general liquidity coverage requirement. This new amendment would treat liquid assets held as part of the cover pool liquidity buffer as unencumbered up to the amount of net liquidity outflows stemming from the associated covered bond program. Moreover, it is necessary to lay down monetization rules for the assessment of liquid assets held in a cover pool liquidity buffer. Regulation 2022/786 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union and shall apply from July 08, 2022.

    ESRB Recommendation

    Via the Recommendation ESRB/2022/3, which amends Recommendation ESRB/2015/2, the General Board of ESRB has decided to include an additional macro-prudential measure in the list of macro-prudential measures that are recommended for reciprocation under Recommendation ESRB/2015/2. The additional macro-prudential measure imposes a systemic risk buffer rate on all internal ratings-based retail exposures to natural persons secured by residential immovable property for which the collateral is located in Belgium. The Recommendation ESRB/2022/3 also amends the text on the reciprocation of certain macro-prudential measures from France, Luxembourg, Netherlands, Norway, and Sweden. Recommendation ESRB/2022/3 has been published in the Official Journal of the European Union.  


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    Keywords: Europe, EU, Banking, CRR, Basel, Credit Risk, Regulatory Capital, Liquidity Risk, LCR, Covered Bond, Covered Bond Directive, Belgium, France, Lithuania, Luxembourg, Norway, Netherlands, Sweden, Systemic Risk, Reciprocity, Macro-Prudential Policy, IRB Approach, Systemic Risk Buffer, TLTRO III, Reporting, ECB, EC, ESRB, Headline

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