EBA欧洲银行-EBA-RTS-2014-05-28Final-draft-RTS-on-additional-collateral-outflows29_67页_1mb

EBA Final Draft Regulatory Technical Standards on Additional Liquidity Outflows

Core Content

The EBA Final Draft Regulatory Technical Standards (RTS) under Article 423(3) of Regulation (EU) No 575/2013 (CRR) aim to enhance liquidity reporting by addressing additional liquidity outflows resulting from adverse market scenarios on derivatives, financing transactions, and other contracts. These standards are part of the EU's effort to harmonize prudential regulations across member states and are designed to ensure that financial institutions maintain sufficient liquidity to meet their obligations during stress periods.

Main Features of the RTS

• Purpose: To determine the measurement of additional collateral outflows due to adverse market scenarios on derivatives, financing, and other contracts.
• Two Methods:
  • Advanced Method for Additional Outflows (AMAO): An internal model-based approach suitable for institutions with large derivative portfolios.
  • Historical Look Back Approach (HLBA): A mandatory floor method applicable to all institutions, regardless of whether they use the AMAO method.
• Materiality Threshold: A derivative portfolio is considered material if the total notional amount exceeds 10% of the net Liquidity Coverage Requirement (LCR) outflows. Institutions below this threshold are excluded from the application of these RTS.
• Exclusion of Certain Methods: The Standard Method and the Simplified Method were removed due to complexity and lack of quantitative impact testing.
• Application to Secured Financing Transactions (SFTs): SFTs are excluded from the calculation of additional collateral outflows unless a currency mismatch could trigger outflows, in which case they should be monitored under the HLBA.

Key Views and Rationale

• The LCR aims to improve the short-term resilience of banks by ensuring they hold enough high-quality liquid assets (HQLA) to cover liquidity needs in a 30-day stress scenario.
• The HLBA, based on the BCBS 2013 approach, is used to capture minimum additional outflows. It involves analyzing the largest collateral difference over the past two years.
• The AMAO method is more sophisticated and allows for a diverse range of adverse market scenarios, but it is restricted to institutions with an approved Internal Model Method (IMM) for counterparty credit risk.
• The EBA acknowledges the potential pro-cyclicality of the HLBA and its limitations, but considers it necessary for regulatory consistency and to provide a baseline for all institutions.
• The EBA has included a threshold for materiality to ensure proportionate application of the rules, particularly for institutions with small portfolios.

Regulatory Context

• The CRR and CRD IV were published in June 2013 and are part of the Basel III framework implementation in the EU.
• The RTS are produced in accordance with Article 10 of the EBA regulation, which mandates that draft RTS be adopted by a regulation or decision.
• These standards are binding across all EU member states and must be implemented directly into national law.
• The EBA has conducted public consultations and received feedback that influenced the finalization of the RTS.

Implementation and Monitoring

• Institutions must notify competent authorities of their intention to apply the AMAO method at least 60 days in advance.
• Institutions may apply the methods on a consolidated, sub-consolidated, or solo basis, and the results can be aggregated.
• Intra-group transactions are excluded from consolidated calculations.
• SFTs are excluded from the calculation of additional collateral outflows unless a currency mismatch exists, in which case they are monitored under HLBA.

Future Review

• The EBA plans to review the RTS within two years to consider:
  • Calibration of the methods.
  • Scenario definitions.
  • Potential introduction of new methods (non-IMM-based).
  • International developments, including the implementation of HLBA in non-EU jurisdictions.
  • Whether the type of contracts covered, such as SFTs, is adequate.

Conclusion

These RTS provide a framework for calculating additional liquidity outflows under adverse market scenarios, ensuring consistency, proportionality, and prudential soundness. They reflect the EBA's response to stakeholder feedback and are aligned with Basel Committee standards. The HLBA serves as the mandatory baseline, while the AMAO offers a more advanced option for institutions with sophisticated models. The EBA remains committed to reviewing and updating these standards to reflect evolving regulatory and market conditions.