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C 51.00 Liquid assets - reporting of intransferable liquidity surpluses

How should surpluses of liquidity held by local legal entities be reported, if these can not be freely transferred to the consolidated entity in times of stress?

Items associated with particular high risk secured with eligible real estate

How do we treat the exposures that would have been otherwise categorised as "Items associated with particular high risk" and which at the same time are secures with mortgages on immovable property? a) Ignore the collateral which opposes the spirit of Regulation (EU) No 575/2013 (CRR) and Credit risk mitigation (CRM) i.e. CRM is recognised when it decreases the Credit risk? b) Recognise them in the exposure class "Secured with mortgages on immovable property"? Additionally, if these items are also in default, should they be recognised in the "In default" exposure class? c) Recognise them in the exposure class "Items associated with particular high risk" and apply the lower RW that are associated with the exposures secures with mortgages on immovable property?

Clarification regarding the legal opinion mentioned in Article 305 of Regulation (EU) No 575/2013 (CRR)

Is it correct to assume that the specific legal opinion mentioned as a prerequisite in Article 305(2)(c) CRR only needs to confirm that the other prerequisites 'individual client segregation' in Art 305(2)a) and the facilitation of the portability of client assets under Art 305(2)(b) are in place and fulfilled (in a sense that the respective legal position of the client is enforceable under respective law(s)), or does the legal opinion need to address additional legal questions beyond that scope? In the latter case what kind of legal questions beyond Art 305(2)(a) and (b) would such legal opinion need to address?

Accounting Scope of Consolidation

Do you agree that the term “within the accounting scope of consolidation” refers to the debtor’s accounting scope of consolidation? Do you agree that the group of connected clients according to large exposure methodology is an adequate approach?

Supervisory powers Liquidity

Does Article 412(5) of Regulation (EU) No. 575/2013 (CRR) prohibit the competent authorities from imposing a “Liquidity-Add-on” (e.g. LCR-requirement above 100%; similarly to a Capital-Add-on according to Article 104(2) of Directive 2013/36/EU (CRD) according to Article 104(1)(k) and/or Article 105?

Repo conducted with a non-financial customer

Article 425 subparagraph 2(a) of Regulation (EU) No 575/2013 (CRR) states that: "Monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50 % of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph." As this provision refers only to secured lending conducted with liquid assets (and not non-liquid assets), it would seem to suggest that repos conducted with a non-financial customer using non-liquid assets is subject to only a 50% inflow rate (e.g. now 100%). Could the EBA please confirm the correct interpretation?

Valuation of liquid assets

If the institution hedges the price risk associated with an asset, it shall take into account the cash flow resulting from the potential close out of the hedge. Does this mean that: – the market value of the asset plus the market value of the hedge has to be reported? – all types of hedges, including CDS have to be included?

Definition of a financial institution

Following the corrigendum of November 30 2013, the definition of a “financial sector entity” (FSE) was modified, however, the definition of a “financial institution” (FI) remained unchanged. We seek clarification for the following two main issues: 1) Clarification is sought on whether all “undertakings other than institutions, the principal activity of which is to acquire holdings” – irrespective of whether the holdings in question relate to undertakings in- or outside of the financial sector – qualify as a financial institution (FI) (and accordingly as a financial sector entity (FSE) pursuant to Article 4(1)(27) of Regulation (EU) No 575/2013 (CRR)) for prudential consolidation purposes and also for purposes of capital deductions for investments in FSEs. 2) As the CRR does not give a definition of what “principal activity” means in relation to FI, there is room for interpretation leading to divergent treatment across Member States – in particular, where a bank owns shares in a holding company that owns a non-financial group (i.e. a group that does not undertake an activity under Annex 1 of Directive 2013/36/EU (CRD)). We seek clarification on whether an undertaking’s principal activity (e.g. to acquire holdings) needs to be determined on an individual basis (i.e. also in the case of holding companies) or whether it can be determined on the basis of its consolidated situation (i.e. including the holding company plus its non-financial subsidiaries and holdings) and by taking into account all relevant qualitative and quantitative criteria (e.g. proportion of assets, of profits and of capital resulting from the acquisition of holdings versus operating activities, including activities listed in Annex I to CRD; human resources deployed; etc) on group level.

Offset of Additional Value Adjustments (‘AVAs’) against Expected Loss (‘EL’) under Article 159

Would the EBA advise whether there is any limitation on the offset of AVAs against EL?