Article 425 (1) of Regulation (EU) No 575/2013 (Capital Requirements Regulation, “CRR”) prescribes that credit institutions must report their liquidity inflows as part of the Liquidity Coverage Ratio (LCR). Certain inflows from counterparties within the same group or the same institutional protection scheme (IPS) may be excluded from this upper boundary with approval by the competent supervisory authority. This page describes the background of the arrangement and contains information about the significant requirements for approval.
Pursuant to Article 425 (1) CRR, credit institutions are required to report their liquidity inflows as part of the Liquidity Coverage Ratio (LCR). To ensure that credit institutions do not solely rely on expected inflows of funds to satisfy their liquidity requirements, and to ensure a minimum level of HQLA (High Quality Liquid Assets), a cap of 75% of the total expected outflows is set for the amount of inflows. A credit institution must therefore principally hold a minimum level of HQLA, which corresponds to at least 25% of the total expected outflows of funds.
In accordance with Article 425 (1) CRR in conjunction with Article 33 of the Delegated Regulation on the LCR, certain inflows from counterparties within the same group or the same institutional protection scheme may be excluded from this cap with approval by the competent supervisory authority. In addition there are also special arrangements for certain types of inflows and special purpose banks. The approval is only granted, if the inflows for which the application is being made are actually suitable to positively influence effective compliance with the LCR in a sustainable manner.
The application for an approval pursuant to Article 425 (1) CRR in conjunction with Article 33 dR LCR is at earliest possible following 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 or to request additional proof from the institutions during the authorisation process.