This page addresses the offsetting of inflows and outflows within the Liquidity Coverage Ratio (LCR). The credit institution has the opportunity on a case-by-case basis, following authorisation by the respective competent supervisory authority (the European Central Bank or the Financial Market Authority as applicable) to apply higher inflows or lower outflows for credit and liquidity facilities.
Undrawn credit or liquidity facilities and any other commitments received are generally not taken into account as inflows (= 0 % inflow; point g) of Article 425 (2) CRR, see point g) of Article 32 (3) of the Delegated Regulation on LCR) and are viewed in a very conservative manner as outflows (up to 100 % run-off-factor, see Article 31 Delegated Regulation on LCR). The danger of contagion of a liquidity shortage from one credit institution to another should hereby be reduced. Other credit institutions are perhaps not in the position to be able to honour credit facilities. They should not be able to decide that the legal and reputational risk in the event of not honouring an acceptance can be taken into account, in order to protect their own liquidity or to reduce their exposure against the credit institution that is encountering liquidity difficulties. Outflows are calculated on an individual basis depending on the counterparties (up to 100 % outflow).
The Delegated Regulation on the LCR (delegated Regulation on LCR) has more closely defined the treatment of credit and liquidity facilities and have drawn up provisions for so-called “preferential treatment”.
Pursuant to Article 422 8 CRR in conjunction with Article 29 dR LCR and Article 425 (4) CRR in conjunction with Article 34 dR LCR the competent authorities may however permit, on an individual basis to apply higher inflows or lower inflows for credit and liquidity facilities, provided that all of the following conditions are fulfilled:
The obligatory cap of 75 % inflows (“75 % cap”, see last sentence of Article 425 (1) CRR) remains unaffected by this authorisation process.
This information should provide a brief overview of the intended procedure: The application for an approval pursuant to Article 425 (4) CRR and/or Article 422 (8) CRR has been possible since the publication of the delegated Regulation in accordance with Article 460 CRR (delegated Regulation LCR) in the Official Journal of the European Union.
This notice is supplied by the Financial Market Authority solely for information purposes. No rights and obligations over and above the provisions of the law can be derived from this information. The Financial Market Authority reserves the right to place additional requirements (e.g. the restriction of inflows) or to request additional proof from the institutions during the approval process.