Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Liquidity risk
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
not applicable
Disclose name of institution / entity:
Name of institution / submitter:
Austrian Federal Economic Chamber, Division Bank and Insurance
Country of incorporation / residence:
Type of submitter:
Industry association
Subject Matter:
Cash outflows on other liabilities

What are the general mandatory requirements for clearing, custody and cash management deposits for the beneficial run-off factors of 5%(with deposit insurance scheme) and 25%(without deposit insurance) respectively? How can it be proved that a client is compromised in its operational functioning upon withdrawal of funds within the 30 day horizon? Can you give us an example?

Background on the question:

Despite the fact that there clearly exist dependencies of clients on single banks (so called “Hausbanken”), especially for small and medium sized entities, there may be difficulties in systematically identifying those clients. We would expect the existence of adequate data to be a major obstacle in spotting the considered counterparties.

Date of submission:
Final Answer:

In accordance with Article 422(3)(a) of Regulation (EU) No. 575/2013 (CRR) institutions shall multiply liabilities resulting from deposits that have to be maintained by the depositor in order to obtain clearing, custody or cash management or other comparable services from the institution by 5% to the extent to which they are covered by a Deposit Guarantee Scheme in accordance with Directive 94/19/EC or an equivalent deposit guarantee scheme in a third country, and by 25% otherwise.

In accordance with Article 422(4) sub paragraph 1 of the CRR, clearing, custody or cash management or other comparable services referred to in point (a) and (d) of paragraph 1 of that article only covers such services to the extent that they are rendered in the context of an established relationship on which the depositor has substantial dependency, meaning that the client shall be unable to withdraw amounts legally due over a 30 day horizon without compromising its operational functioning. Moreover, they shall not merely consist in correspondent banking or prime brokerage services.  The institution shall have evidence that the client is unable to withdraw amounts legally due over a 30 day horizon without compromising its operational functioning.

Article 422(4) second subparagraph of the CRR states that, pending a uniform definition of an established operational relationship, institutions shall themselves establish the criteria to identify an established operational relationship for which they have evidence that the client is unable to draw amounts legally due over 30 days without compromising its operational functioning. The institution shall report these criteria to the competent authorities. In the absence of a uniform definition competent authorities may provide general guidance. It should be noted that the Report provided by EBA to the Commission under Article 509(1) of the CRR assesses the definition of established relationship for non-financial customer as referred to in Article 422(3)(c) of the CRR in accordance with paragraph (2)(k) of the Article 509(1).

Notwithstanding the above mentioned articles and any guidance provided by competent authorities in the absence of a uniform definition, for deposits under Article 422(3)(a) and (d) of the CRR, institutions can provide different forms of evidence that a client cannot withdraw the deposited amount over a 30 day horizon without compromising its operational functioning. Q&A 135 provides some elements to inform institutions of the different forms of evidence they can provide to demonstrate that a client cannot withdraw the deposited amount. 

Furthermore, for reporting purposes, institutions are encouraged to consider the following criteria to identify qualifying activities in the context of clearing, custody or cash management or other comparable services activities:

  • the customer is reliant on the bank to perform these services as an independent third party intermediary in order to fulfil its normal banking activities over the next 30 days. For example, this condition would not be met if the bank is aware that the customer has adequate back-up arrangements;
  • these services must be provided under a legally binding agreement to institutional customers; and
  • the termination of such agreements shall be subject either to a notice period of at least 30 days or significant switching costs (such as those related to transaction, information technology, early termination or legal costs) to be borne by the customer if the operational deposits are moved before 30 days.
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

Update 26.03.2021: This Q&A has been archived as the issue it deals with is addressed in Article 27 of Delegated Regulation (EU) 2015/61 and the July 2019 EBA report on LCR implementation in the EU.