EBA欧洲银行-2014-LCR-IA-report_199页_5mb

Summary of the EBA Second Report on Impact Assessment for Liquidity Measures under Article 509(1) of the CRR

Core Content

This report, published by the European Banking Authority (EBA) in December 2014, is the second impact assessment (IA) under Article 509(1) of the Capital Requirements Regulation (CRR). It evaluates the impact of the Liquidity Coverage Ratio (LCR) on the EU banking sector and financial markets, using data from the end of December 2013. The report aims to update the findings from the first IA report (based on December 2012 data) and integrate new regulatory developments, such as the Delegated Act (DA) on the LCR.

Main Objectives and Focus

• Update LCR analysis: Based on the latest data from December 2013, the report provides an updated assessment of the LCR and its compliance across the EU banking sector.
• Analyze adjustment strategies: It examines how banks have adapted their business models and balance sheets to meet the LCR requirements since 2011.
• Assess interactions with other ratios: The report investigates the interplay between the LCR and other regulatory ratios, including the Net Stable Funding Ratio (NSFR), Leverage Ratio (LR), and Common Equity Tier 1 (CET1).
• Evaluate lending supply impact: It specifically looks at the effect of the LCR on lending supply, with a focus on SMEs and trade financing.
• Compare EU and BCBS LCR frameworks: The report compares the EU LCR framework (as specified in the DA) with the Basel III LCR framework.

Key Findings

LCR Compliance and Trends

• The LCR of EU banks improved further from December 2012 to December 2013.
• The LCR compliance rate increased, with more banks meeting the regulatory requirement.
• The average LCR for EU banks in December 2013 was higher than in December 2012, indicating better liquidity management.
• The composition of liquid assets shifted, with an increase in High-Quality Liquid Assets (HQLA) and a decrease in non-HQLA.

Adjustment Strategies

• Banks primarily used the following strategies to improve LCR compliance:
  • Reallocation of assets: Substituting non-HQLA with Level 1 HQLA.
  • Reallocation of liabilities: Swapping wholesale funding for retail deposits.
  • Deleveraging: Selling loans and reducing outflows.
  • Buying HQLA financed by debt or equity.
• These strategies had varying impacts on other regulatory ratios, such as CET1, LR, and NSFR.

Impact on Lending Supply

• The LCR had a limited impact on the cost of lending to SMEs and non-financial corporations.
• There was a slight reduction in lending supply, particularly for SMEs, due to liquidity constraints.
• The report suggests that the LCR may have contributed to a tightening of credit conditions, but the overall effect was not severe.

Comparison with Basel III

• The EU LCR framework (as defined in the DA) differs from the Basel III LCR in several aspects, including:
  • HQLA composition: The DA includes a broader range of instruments as HQLA compared to Basel III.
  • Outflow rates: The DA applies different outflow rates for certain types of deposits and loans, which affect the liquidity gap.
  • Inflow rates: The DA provides more favorable treatment for some inflows, such as undrawn credit and liquidity facilities for domestic intragroup entities.
• The overall impact of the DA on the LCR was estimated to be a positive effect, increasing the LCR for many banks.

Methodology and Data

• The analysis is based on data from the Quantitative Impact Study (QIS), specifically the data from December 2013.
• The sample includes Group 1 and Group 2 banks, as well as data by country and business model.
• Sensitivity analysis was conducted to assess the impact of changes in key components of the LCR.
• Multivariate analysis was used to evaluate the relationship between LCR adjustments and other regulatory ratios.

Business Model Analysis

• Different business models (e.g., auto and consumer credit banks, trade finance banks) had varying LCR levels and adjustment strategies.
• Banks with a higher proportion of retail deposits generally had better LCR compliance.
• The DA had a more significant impact on certain business models, particularly those with high levels of non-HQLA and short-term liabilities.

Conclusion

• The LCR has had a limited negative impact on the EU economy and financial markets, with the effect on lending supply being relatively small.
• The DA has improved the LCR for most EU banks, with a positive overall impact.
• The report highlights the importance of fine-tuning the LCR framework to ensure consistency with other regulatory ratios and to support the stability of financial markets.
• Further analysis is recommended for certain areas, such as the interaction between the LCR and monetary policy, and for more detailed operational requirements for HQLA.