17 December 2020
The European Banking Authority (EBA) published today its EBA Report on liquidity measures, which monitors and evaluates the liquidity coverage requirements currently in place in the EU. The liquidity coverage ratio (LCR) of EU banks stood at around 166% in June 2020, materially above the minimum threshold of 100%.
The Report shows that EU banks have continued to improve their LCR. This trend continued at end-June 2020 even if the Covid-19 crisis had an impact on banks’ liquidity positions. At end-June 2020, EU banks' average LCR stood at 166% and no bank reported LCR levels below 100%. The access to additional liquidity via extraordinary central bank facilities supported EU banks’ efforts to maintain their LCR buffers.
A more in-depth analysis of potential currency mismatches in LCR levels revealed that EU banks tend to hold materially lower liquidity buffers in some foreign currencies, in particular US dollar. The activation of FX swap lines among the major central banks in the first semester of 2020 helped mitigate the stress in the FX funding markets and contributed to an improvement in EU banks’ foreign currency LCRs.