2015_2001 Credit risk - standardised approach

Question ID:

2015_2001

Legal Act:

Regulation (EU) No 575/2013 (CRR)

Topic:

Credit risk

Article:

134

Paragraph:

COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:

Not applicable

Article/Paragraph:

n.a.

Disclose name of institution / entity:

Yes

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.

Date of submission:

11/05/2015

Published as Final Q&A:

13/11/2015

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.