Information for credit institutions regarding notifications to the competent authority in the event of non-compliance or expected non-compliance of the liquidity coverage requirement pursuant to Art. 414 CRR in conjunction with Art. 4 dR LCR
The liquidity coverage ratio (“LCR”) entered into force on 1 October 2015 with a transitional period, with an indicator level of 60% (Article 38 of the Delegated Regulation on LCR). The minimum level of the indicator (“liquidity coverage requirement” pursuant to Article 412 CRR) will be gradually increased up to 100% until 1 January 2018 (Article 460 (2) CRR).
From 1 October 2015, in the event that there is a shortfall of the respective applicable liquidity coverage requirement pursuant to Article 412 CRR, then legal consequences in accordance with Article 414 CRR will automatically enter into force.
Article 414 CRR prescribes the following obligations for credit institutions:
Notification to the competent authority in the case of non-compliance or expected non-compliance with the liquidity coverage requirement
The notification is to be submitted via the Incoming Platform. Please note that the notification in accordance with Article 414 CRR is to be submitted without delay.
Immediate submission of a liquidity restoration plan
The liquidity restoration plan is to be submitted via the Incoming Platform. The liquidity restoration plan must contain – in addition to a description of the acute liquidity stress (the type of stress, a prognosis about the duration of the stress scenario) – specific information about current as well as planned reactions and implementing measures (liquidation of assets, adaptation of the transformation of maturities, including information about the volumes concerned and haircuts), as well as the timetable for doing so. Purely abstract information is not sufficient about potential business transactions and hoped for liquidations of positions as well as references to other existing documents (e.g. the recovery plan). There is no uniform form for the liquidity restoration plan. It is the bank’s responsibility to submit a feasible and plausible plan. Please note that the submission of unsuitable liquidity restoration plans constitutes a breach of Art. 12 para. 12 KI-RMV (emergency plans).
Daily notification of the LCR until compliance is restored
The institution shall submit daily LCR notifications (the full LCR statement), until the prescribed LCR threshold value has been reached on a stable basis. From the FMA’s perspective a stable LCR will be deemed to exist when it is above the target value for the entirety of at least one full reporting period. Article 414 CRR does not permit the competent authority to prescribe a less frequent reporting frequency on a general basis. The reduction of the frequency of notifications to e.g. weekly notifications can therefore only be permitted in specific individual cases.
The continued or repeated LCR shortfall results in administrative penal sanction pursuant to Art. 98 para. 5 no. 1 BWG. Reporting infringements in relation to the LCR will incur sanctions pursuant to Art. 98 para. 5a no. 7 BWG.