- Question ID
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2024_7042
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Supervisory reporting - Liquidity (LCR, NSFR, AMM)
- Article
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415
- Paragraph
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3
- Subparagraph
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d
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Regulation (EU) 2021/451 – ITS on supervisory reporting of institutions (repealed)
- Article/Paragraph
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18
- Type of submitter
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Credit institution
- Subject matter
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Assets which are not immediately available for monetisation in C 66.01
- Question
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In relation to the reporting of the C 66.01 maturity ladder template, how should encumbered assets be reported in terms of maturity buckets and amount, based on the definition of these assets of the Regulation EU/2021/451 on supervisory reporting and which refers to Commission Delegated Regulation (EU) 2015/61 and (EU) 2022/786 on LCR?
- Background on the question
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Regulation EU/2021/451 on Supervisory Reporting annex XXIII states, for lines 730 to 1080, that assets reported in the columns of the counterbalancing capacity shall include only unencumbered assets available to the institution to convert into cash at any time to fill contractual gaps between cash inflows and outflows during the time horizon. For those purposes, the definition of encumbered assets in accordance with Commission Delegated Regulation (EU) 2015/61 shall apply.
Commission Delegated Regulation (EU) 2015/61 in relation to Liquidty Covering Ratio states in article 7 that an asset shall be deemed unencumbered where the credit institution is not subject to any legal, contractual, regulatory or other restriction preventing it from liquidating, selling, transferring, assigning or, generally, disposing of such asset via active outright sale or repurchase agreement within the following 30 calendar days.
Moreover, Delegated Regulation EU/2022/786 modifies article 7 of Regulation 2015/61 stating that liquid assets that are held as part of the cover pool liquidity buffer shall be deemed to be unencumbered during the 30 calendar day stress period up to the amount of net liquidity outflows.
On the other hand, Q&A number 2020_5158 states that "assets which are, according to the institution’s or supervisor’s assessment, not readily available for monetisation at the reporting date should not be reported as initial stock under Section 3 in template C 66.01. However, institutions may consider an inflow of counterbalancing capacity, to be reported in the relevant row and under the time band (column) which is reflecting the effective availability of the assets to cover potential contractual funding gaps."TIme horizon defined in LCR regulation is 30 days whereas maturity buckets of the C66 template range from different period of time, leaving room for interpretation to fill in C66.01 template. Regulation EU/2021/451 explicitly refers to the definition of unencumbered assets in the perspective of the LCR calculation but doesn't develop on the amount to be reported.
By way of example for a reporting as of September 2023 : covered bonds of 2 billions have a term as of November 2024. Outflows are to be reported in the maturity ladder time bucket column 200 - "more than 12 months and less than 2 years". Corresponding liquid assets are available for counterbalancing capacity from November 2024. The question is: should the 2 Billion liquid assets be reported in the time band more than 12 months and less than 2 years since this is their effective availability or not because their term is not within 30 days after the begining of the maturity bucket (ie different from October 2024) in reference to the 30 days time horizon of LCR regulation? And should the amount of liquid assets available be capped to the net outflow amount or should the whole amount of available liquid assets be reported?
Applying the principle of the effective availability would lead to include those 2 billion liquid assets in the stock of counterbalancing capacity for time bucket column 200 - "more than 12 months and less than 2 years" - as well as for the following maturity buckets (i.e. columns 201, 220 and following), providing the assets stay effectively available on those buckets as well : This would enable to maintain a symetry between the cumulated net outflows and the cumulated liquid assets, for each time bucket and reflect the effective liquidity risk position (the liquidity gap being hedged with available liquid assets).
- Submission date
- Final publishing date
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- Final answer
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In accordance with Annex XXIII of the Commission Implementing Regulation (EU) 2021/451, assets reported in the columns of the counterbalancing capacity shall include only unencumbered assets available to the institution to convert into cash at any time to fill contractual gaps between cash inflows and outflows during the time horizon. For those purposes, the definition of encumbered assets in accordance with Commission Delegated Regulation (EU) 2015/61 shall apply
Therefore, institutions shall report only assets that are unencumbered following Commission Delegated Regulation (EU) 2015/61 and they shall be allocated across the twenty-two time buckets in accordance with their residual maturity and their availability.
In particular, liquid assets that are held as part of the cover pool liquidity buffer shall be deemed to be unencumbered during the 30-calendar day stress period, up to the amount of net liquidity outflows as envisaged in paragraphs 2a and 2b of Article 7 of the Commission Delegated Regulation (EU) 2015/61 and calculated as envisaged under Title III of the same regulation.
In case the assets do not qualify as counterbalancing capacity at the reference date but would qualify as such at a later point in time (e.g. assets encumbered at the reporting date): they are not reported in the initial stock of the counterbalancing capacity section of the template but instead they should be reported as an inflow in the counterbalancing capacity section within the appropriate maturity bucket when they become available.
- Status
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Final Q&A
- Answer prepared by
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Answer prepared by the EBA.
Disclaimer
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