Question ID:
2013_378
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Supervisory reporting - Liquidity (LCR, NSFR, AMM)
Article:
415
Paragraph:
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)
Article/Paragraph:
N/a
Disclose name of institution / entity:
Yes
Name of institution / submitter:
Association for Financial Markets in Europe
Country of incorporation / residence:
Europe
Type of submitter:
Industry association
Subject Matter:
Inclusion of transactions between trade and settlement dates
Question:

We would welcome clarification on the reporting of transactions between trade and settlement dates. Firms apply typically a contractual approach which results in inflows and outflows being grossed up and subject to the 75% inflow cap - this means that a liquid asset requirement of 25% applies to trades that settle to a zero position or have a net cash flow of zero. For example, a bank might enter a trade to purchase a $100m bond from counterparty A, settlement at t+3. The bank also enters into an addition trade to sell the same bond to counterparty B with settlement also occurring at t+3. Both cash flows will occur on day 3 and net to zero and the balance sheet position will also be zero. However, if the inflows and outflows were reported separately then the 75% inflow cap would apply.

Background on the question:

Please refer to the background provided in the question above.

Date of submission:
10/10/2013
Published as Final Q&A:
30/04/2014
Final Answer:

Each business transaction has to be seen as a single separate transaction within the LCR framework. Therefore a grossing up of in- and outflows is applied, apart from derivatives payables and receivables in application of Article 422.6 of the CRR. Eventually inflows could be subject to the 75% inflow cap. There is no need for a prudential easing in form of a netting provision for a sample of unsettled trades.

 

Status:
Final Q&A
Answer prepared by:
Answer prepared by the EBA.
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