Question ID
2015_2001
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Credit risk
Article
134
Paragraph
3
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
n.a.
Name of institution / submitter
ECB
Country of incorporation / residence
Germany
Type of submitter
Competent authority
Subject matter
Credit risk - standardised approach
Question

Can cash equivalents be assigned a Risk weight of 0%? What is the definition of an equivalent cash item?

Background on the question

Question raised to ECB Methodology and Standards Development Division.

Submission date
Final publishing date
Final answer

The term "equivalent" in Article 134 (3) of Regulation (EU) No 575/2013 (CRR) does not refer to alternatives to "cash items" but to alternatives to "cash in hand".

Cash in hand, as defined by Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions, Annex V, Part 2, Point 1 (Instructions on Balance Sheet, Assets), includes holdings of national and foreign banknotes and coins in circulation that are commonly used to make payments.

The 0% risk weight is solely applicable to cash items but not to "cash equivalents". The applicability of the 0% risk weight is, however, not limited to cash in hand but extends to other forms of cash items different from deposits, on the balance sheet of the institution under the applicable accounting framework.

Balances in local currency held on current accounts of the respective central bank should be treated according to Article 114.

Please also see Q&A 180.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.