British Bankers' Association

We support the proposed thirty day notification mechanism and thank the EBA for recognising that there may be exceptional circumstances where it is not possible to comply with this notification period.
The preconditions for the use of either of the derogations are succinctly explained and reasonable. A question arises in relation to the period over which an institution must demonstrate that it has used sound liquidity management to reduce its need for liquid assets. We do not believe that it is necessary to prescribe a particular period in the RTS; rather this issue can be covered as part of the annual supervisory liquidity review process.
The workings and conditions of derogation A are clearly described and we do not believe any major changes are required. However we note that Art.4 4 (a) requires currency mismatches to be measured, monitored, controlled and justified. We recommend the removal of the justification requirement, which is additional to the text contained in Annex 3 of BCBS 238 and which introduces an unhelpful degree of subjectivity into this requirement.

We therefore recommend the amendment of this paragraph as follows:

(4) An institution shall ensure that its foreign exchange risk management framework meets each of the following requirements:
(a) currency mismatches resulting from the use of derogation A are adequately measured, monitored, controlled and justified;
We have no views on this question.
Whilst we appreciate the rationale for an additional haircut as a way of controlling for currency risk we do not agree that a haircut should be applied where the institution has hedged this exposure.

We therefore recommend the amendment of Art. 4 5 as follows:


(5) An institution which uses liquid assets in a currency other than the currency of the Member State of the relevant competent authority to cover liquidity needs in the latter currency shall apply an additional haircut of 8% to the value of those assets, if the foreign exchange exposure is not fully hedged
Yes – we support the premise on which Derogation B is based, that there should be no economic benefit to the institution in obtaining a central bank liquidity line.
Yes the requirements that limit utilisation of the derogations to the relevant shortage percentage is reasonable and we see no need to amend Article 5.
Yes.
We have no views on this question.
simon hills
B