EBA欧洲银行-EBA-RTS-2014-04-28Final-Draft-RTS-on-derogations-for-currencies-with-constraints29_41页_890kb

Summary of EBA Final Regulatory Technical Standards on Derogations for Currencies with Constraints on the Availability of Liquid Assets

Core Content

The EBA has developed final draft regulatory technical standards (RTS) under Article 419(5) of Regulation (EU) No 575/2013 (CRR) to address liquidity coverage requirements for currencies with constraints on the availability of high-quality liquid assets (HQLA). These standards are part of the "single rule book" initiative to ensure regulatory harmonisation across the European Union.

The RTS outline two derogations (A and B) that allow institutions to meet liquidity coverage requirements (LCR) in currencies where the availability of HQLA is insufficient. Derogation A permits the use of foreign currency liquid assets with an additional 8% haircut to account for currency risk. Derogation B allows the use of central bank credit lines as liquid assets, with associated fees that offset the yield of the assets used to secure these lines and reflect the amount drawn down.

Main Features of the RTS

• Derogation A:

  • Applies to foreign currency liquid assets used to meet domestic currency net outflows.
  • Requires an additional 8% haircut to adjust for currency risk.
  • Haircut may be lower for currencies with a mutually supported peg and higher for non-global currencies.
  • Institutions must maintain effective systems to monitor and control the use of derogation A.

• Derogation B:

  • Allows the use of central bank credit lines as liquid assets.
  • Requires fees to be paid to the central bank, which should offset the higher yield on the assets used to secure the credit lines.
  • Fees should also reflect the amount drawn down.
  • Credit lines must be contractually irrevocable for the next 30 days and fairly priced.

• Conditions for Application:

  • Institutions must demonstrate they have taken reasonable steps to reduce liquidity needs through sound management.
  • The use of derogations should be limited and inversely proportional to the availability of HQLA.
  • Institutions must notify competent authorities 30 days in advance of using a derogation or making a material change in its use.

• Monitoring and Reporting:

  • Institutions must implement mechanisms to monitor, disclose, and assess the use of derogations.
  • Derogation usage must be reported in the ITS (Implementing Technical Standards) in accordance with Article 415(3) of the CRR.

Key Objectives

• Avoid an uneven playing field: Derogations should not provide an undue advantage to institutions.
• Mitigate undue risks: Institutions should not be exposed to excessive risks by using derogations.
• Limit derogation use: Use should be restricted to the percentage of shortfall in the relevant currency as specified in the ITS.

Derogation Usage Limit

• The total use of derogations by an institution is limited to the shortfall percentage for the currency in the ITS.
• This ensures that derogations are inversely proportional to the availability of HQLA, as outlined in Article 419(3) of the CRR.

Regulatory Process

• The EBA conducted a public consultation from 22 October to 22 December 2013.
• The Banking Stakeholder Group (BSG) was consulted, and their views were taken into account.
• The EBA did not make any changes to the draft RTS based on the consultation responses.
• The final RTS were submitted to the European Commission for adoption as a delegated regulation.

Legal Basis and Oversight

• The delegated regulation is based on the EBA's draft RTS and aligns with the BCBS standards.
• It ensures effective oversight and control of derogation use.
• Institutions must notify competent authorities 30 days before initial use or a material change in usage.

Impact and Considerations

• The derogations are intended to address inherent liquidity challenges in certain currencies.
• Cost-benefit analysis and stakeholder feedback were considered in the development of the RTS.
• The EBA believes that the derogation usage is appropriate given the shortfall in HQLA.
• The Commission may introduce amendments based on further analysis, such as a cap on high liquidity assets.

Conclusion

These RTS provide a structured and proportionate approach to addressing liquidity coverage requirements in currencies with limited availability of HQLA. They ensure fairness, risk mitigation, and transparency in the use of derogations, while aligning with international standards and EU regulatory goals.