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Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
N/a
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.

Submission date
Final publishing date
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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