Question ID
2021_6163
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Liquidity risk
Article
460
Paragraph
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Article/Paragraph
32
Type of submitter
Competent authority
Subject matter
LCR treatment of open maturity reverse repos which can be terminated at any point in time
Question

What is the LCR treatment of reverse repos with open maturity which can be terminated at any point in time? Will they be considered as regular secured lending transactions pursuant to Article 32(3)(b) of Delegated Regulation (EU) 2015/61? Or are they to be excluded since any inflows arising from the termination of those transactions are contingent?

Background on the question

While existing EBA Q&As do not explicitly cover the case of reverse repos with open maturity which can be terminated at any point in time by the liquidity provider, existing EBA Q&As provide for an exclusion of liquidity inflows that are contingent upon the exercise of an option (irrespective of the concrete product at stake). This high-level approach is also reflected in paragraph 72 of the first EBA monitoring report on the implementation of the LCR in the EU.

Submission date
Final publishing date
Final answer

In accordance with Article 32(1) of the Commission Delegated Regulation (EU) No 2015/61, inflows may only comprise contractual inflows from exposures which are not past due and for which the institution has no reason to expect non-performance within the 30-day period.

Therefore, options that would advance inflows to the reporting institution shall be considered contingent and not contractual, hence as not to be exercised. Accordingly, reverse repos with open maturity not formally called for within the 30-day horizon and contingent on the option for the reporting institution of the reverse-repo to trigger the liquidity inflow, shall not be considered as inflows in the LCR.

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

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.