How should payment commitments pursuant to Article 2(13) DGSD (Directive 2014/49/EU) be treated in the outflow-section of LCR?
According to Article 10(3) DGSD the financing of deposit guarantee schemes (DGSs) may include payment commitments by the credit institutions (the total share of payment commitments shall not exceed 30 % of the total amount of available financial means).
Article 2(13) of the DGSD states that "payment commitments" means payment commitments of a credit institution towards a DGS which are fully collateralised providing that the collateral: (a) consists of low-risk assets; and (b) is unencumbered by any third-party rights and is at the disposal of the DGS.
In the Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement there are no provisions regarding the treatment of such payment commitments. From our view, payment commitments can neither be qualified as a deposit, nor as secured funding, nor as a liquidity facility. Therefore payment commitments could be subject to a 100% outflow according to Article 31(10) Delegated Act LCR.
However this would ignore the required collateralisation of the payment commitments pursuant to Article 2(13) DGSD in cases where the collateral does qualify as HQLA (Article 28(3) of the Delegated Regulation (EU) 2015/61).
Pursuant to Article 4(3) of the DGS Directive, a credit institution authorised in a Member State pursuant to Article 8 of Directive 2013/36/EU shall not take deposits unless it is a member of an officially recognised deposit guarantee scheme. Therefore the funding obligations resulting from membership, including contributions, in the form of cash or payment commitments to a DGS, should be regarded as operating expenses which, according to Article 28(2) of the Commission Delegated Regulation (EU) No 2015/61 (DR), should be multiplied by 0%.
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.