Single Rulebook Q&A

Question ID: 2017_3598
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Liquidity risk
Article: 425
Paragraph: 1
Subparagraph:
Article/Paragraph : 33
COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Name of institution / submitter: European Central Bank
Country of incorporation / residence: Germany
Type of submitter: Competent authority
Subject matter : Scope of application of the exemption from the cap on inflows in the Liquidity Coverage Ratio
Question:

Is it legally possible for a liquidity sub-group (as per Article 8 CRR) to apply for an increase in the cap on inflows from 75% to 90% (in accordance with Article 33(4) and Article 33(5) of LCR Commission Delegated Regulation (EU) 2015/61) only for the cash inflows generated by one institution in the liquidity sub-group?

Background on the question:

Institutions that are part of a liquidity sub-group do not have to comply with Part Six of Regulation (EU) No 575/2013 at individual level. It is understood from EBA Q&A 2016_2870 that a sub-group may be granted a preferential treatment in accordance with Article 33(4) and Article 33(5) of LCR Commission Delegated Regulation (EU) 2015/61 to the extent that the conditions are met at sub-consolidated level.

We are asking whether it would be possible to allow for an exemption from the cap on inflows only for the inflows generated by one entity in the liquidity sub-group. On a stand-alone basis, this individual institution would comply with the requirements under Article 33(5) of LCR Commission Delegated Regulation (EU) 2015/61.

Date of submission: 21/11/2017
Published as Final Q&A: 27/04/2018
EBA answer:

Articles 33(3) and (4) of the Delegated Regulation (EU) 2015/61 provide for a competent authority discretion to exempt certain specialised credit institutions  from the Article 33(1) 75% inflow cap, when they comply with the conditions set out in paragraph 5.

As stated in Article 33(6) of the Delegated Regulation (EU) 2015/61 and clarified by the EBA Q&A 2016_2870 these exemptions may be granted by the competent authority at an individual and/or consolidated (sub-consolidated) level subject to the compliance with the requirements set out in Article 33(5) at an individual and/or consolidated (sub-consolidated) level respectively.

When a liquidity waiver is granted pursuant to Article 8 of Regulation (EU) No 575/2013 (CRR), all the institutions involved are merged to form a single liquidity group or sub-group and will then have to comply with liquidity requirements at consolidated or sub-consolidated level. Consistently, a liquidity group or sub-group only benefits from regulatory exemptions at consolidated or sub-consolidated level. As a result, a liquidity group or sub-group which stands to benefit from a cap exemption or a 90% cap according to Article 33 of the Delegated Regulation (EU) 2015/61 has to comply with all the criteria at a consolidated or sub-consolidated level. Notwithstanding the wording of Article 33(5) letter (a) ii) and letter (b) of the Delegated Regulation (EU) 2015/61, the legal basis for compliance with all the criteria set out in Article 33(5) is the total inflows at the consolidated or sub-consolidated level.

Accordingly, competent authorities may only allow a liquidity group or sub-group to apply a preferential treatment at consolidated or sub-consolidated level for all of its inflows to the extent that the requirements set out in Article 33(5) of the Delegated Regulation (EU) 2015/61 are met at consolidated or sub-consolidated level.

Therefore, referring to the concrete case provided in the question, a liquidity sub-group cannot apply for the exemption of the inflow cap in accordance with Article 33(4) and Article 33(5) of the Delegated Regulation (EU) 2015/61 for the cash inflows generated by only one institution in the liquidity sub-group.

Status: Final Q&A
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