Credit institutions must always have sufficient liquid assets available to ensure their capacity to pay their creditors (other banks, customers, etc.). The Liquidity Coverage Ratio (LCR) liquidity coverage requirement has been introduced as well as a benchmark for stable refinancing, the Net Stable Funding Ratio (NSFR), in order to ensure that this is also the case in times of stress. The obligation to observe these requirements applies both on a consolidated basis as well as on an individual level.
A possible exemption from these liquidity requirements exists for credit institutions that are also subject to consolidated supervision or which are part of an IPS. This section describes the details relating to the procedure and the application process for exemption (a waiver) from the application of the liquidity requirements on an individual basis.
Credit institutions must, if they wish to make use of a waiver, receive the approval of the relevant competent supervisory authority (the European Central Bank or the Financial Market Authority) for a waiver regarding liquidity requirements on an individual basis. Applications in accordance with Article 8 CRR must be submitted by the respective consolidating institution.
Regulation (EU) No 575/2013 (“CRR”) on prudential requirements for credit institutions and investment firms has been in force since 1 January 2014. Part Six of the CRR (Articles 411 to 428 CRR) defines the provisions governing liquidity. These are further determined and applied by the delegated Regulation on the LCR, which was issued on 10 October 2014.
Under Article 8 CRR, the Financial Market Authority may grant a partial or complete exemption (waiver) to the subordinate institutions of a group of credit institutions (para. 2) and members of an Institutional Protection Scheme (para. 4) of the application of Part Six CRR (liquidity) and monitor them as a separate liquidity sub-group, provided that all of the requirements stated in Article 8 (1) CRR have been fulfilled.
Subsidiaries, which have been excluded from the scope of supervisory consolidation pursuant to Article 19 CRR (“de minimis”) are not entitled to apply for an exemption.
The liquidity coverage requirement is determined in Article 412 (1) CRR. Institutions are required at all times to:
“hold liquid assets, the sum of the values of which covers the liquidity outflows less the liquidity inflows under stressed conditions so as to ensure that institutions maintain levels of liquidity buffers which are adequate to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions over a period of thirty days.”
The obligation to comply with the Liquidity Coverage Requirement (LCR) entered into force on 1 October 2015 (see Article 460 (2) CRR).
Reporting requirements continue to exist
An exemption (waiver) granted by the Financial Market Authority or the European Central Bank from the application of the liquidity requirements on an individual basis (liquidity waiver) does not exempt institutions from reporting obligations in accordance with Part Six of the CRR or from the requirements in accordance with ITS reporting (LCR, NSFR, supplementary monitoring instruments).
The obligation to comply with the stable funding requirements (NSFR – Article 413 (1) CRR) entered into force on 1 January 2016 (see Article 521 (2) b) CRR).
A timeframe of six months shall generally apply for the procedure from the date of submission of the complete application. If the institution also intends to apply for an exemption in accordance with Art. 30b BWG in conjunction with Article 7 CRR then this should if possible be applied for at the same time as this procedure.
If the institution also intends to apply for an exemption in accordance with Article 30b BWG in conjunction with Article 7 CRR (Exemption from the application of solvency requirements on an individual basis) then this should be applied for where possible at the same time as this procedure.
The application must be submitted by the consolidating institution (including the necessary proof of authorisation and the necessary signatures of the party giving the authorisation).
The application must contain the following items:
The information provided is intended purely as a service by the FMA. No rights and obligations over and above the provisions of the law can be derived from this information.
The FMA reserves the right to place additional requirements or to request additional proof from the institutions during the authorisation process.
Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit Institutions Text with EEA relevance (Commission Delegated Regulation on the LCR)