Single Rulebook Q&A

Question ID: 2015_2236
Legal act : Regulation (EU) No 575/2013 (CRR)
Topic : Liquidity risk
Article: Delegated Act LCR, Article 33
Paragraph: 5
Subparagraph: 2
Article/Paragraph : n/a
COM Delegated or Implementing Acts/EBA RTS/EBA ITS/EBA GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Subject matter : Cap on inflows
Question:

Does a credit institution benefit from a cap on inflows of 90% when the sum of its activities as referred to in Article 33(3) and its activities as referred to in Article 33(4) exceeds 80% of the total balance sheet?

Background on the question:

Article 33(5)(b) of the Delegated Regulation (EU) 2015/61 states that the ratio of the main activities as referred to in Article 33(3) OR in Article 33(4) exceeds 80% of the total balance sheet. A specialised credit institution could have as main activities as referred to in Article 33(3) and in Article 33(4) above 80% of the total balance sheet but not reaching the 80% level for activities as referred to in Article 33(3) or in Article 33(4) individually.

Also, two distinct subsidiaries of the same specialised credit institution could be implemented: the first one having as main activity as referred to in Article 33(3) above 80% of the total balance sheet and the second one having as main activity as referred to in Article 33(4) above 80% of the total balance sheet. These two subsidiaries would benefit from a full exemption on inflows and a cap on inflows of 90% respectively.

Date of submission: 21/08/2015
Published as Final Q&A: 27/05/2016
EBA answer:

Recital 16 of the Delegated Regulation (EU) 2015/61 explains that the application of the general 75% cap on inflows is to ensure a minimum amount of the liquidity buffer and to reduce the effect of potential gaps between the timing of inflows and outflows in the denominator of the LCR. However this recital considers that under some criteria which could mitigate those risks some specialised business models like leasing and factoring or financing for the acquisition of motor vehicles and consumer credit, for reasons of proportionality, could be authorised to apply a total or partial exemption on the general cap.


Article 33(3) and Article 33(4) of the Delegated Regulation (EU) 2015/61 state that a credit institution may be exempted from the cap on inflows or subject to a 90% cap when, respectively, its main activities are i) leasing and factoring business, excluding the activities of financing for the acquisition of motor vehicles and consumer credit, or ii) financing for the acquisition of motor vehicles and consumer credit. These activities should in each case represent at least 80% of the total balance sheet at individual level and additionally the rest of the criteria envisaged in Article 33(5) of the Delegated Regulation (EU) 2015/61 should be met.


Considering that the arguments in Recital 16 are applicable to all these activities and that all of them are subject to the same criteria in Article 33(5) of the Delegated Regulation (EU) 2015/61, a credit institution which has activities under Article 33(3) and under Article 33(4) which exceed jointly 80% of the total balance sheet but neither of them is exceeding individually this threshold can be authorised to apply a 90% cap on the inflows stemming from its leasing and factoring activities and from financing for the acquisition of motor vehicles and consumer credit.

Status: Final Q&A
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