17.1.2015   

EN

Official Journal of the European Union

L 11/1

(1)

During the early ‘liquidity phase’ of the financial crisis that began in 2007, many credit institutions, despite maintaining adequate capital levels, experienced significant difficulties because they had failed to manage their liquidity risk prudently. Some credit institutions became overly dependent on short term financing which rapidly dried up at the onset of the crisis. Such credit institutions then became vulnerable to liquidity demands because they were not holding a sufficient volume of liquid assets to meet demands to withdraw funds (outflows) during the stressed period. Credit institutions were then forced to liquidate assets in a fire-sale which created a self-reinforcing downward price spiral and lack of market confidence triggering a solvency crisis. Ultimately many credit institutions became excessively dependent on liquidity provision by the central banks and had to be bailed out by the injection of massive amount of funds from the public purse. Thus it became apparent that it was necessary to develop a detailed liquidity coverage requirement whose aim should be to avoid this risk by making credit institutions less dependent on short-term financing and central bank liquidity provision and more resilient to sudden liquidity shocks.

(2)

Article 412(1) of Regulation (EU) No 575/2013 imposes a liquidity coverage requirement on credit institutions formulated in general terms as an obligation to hold ‘liquid assets, the sum of the values of which covers the liquidity outflows less the liquidity inflows under stressed conditions’. Pursuant to Article 460 of Regulation (EU) No 575/2013, the Commission is empowered to specify in detail that liquidity coverage requirement and the circumstances under which competent authorities have to impose specific in- and outflow levels on credit institutions in order to capture specific risks to which they are exposed. In accordance with Recital 101 of Regulation (EU) No 575/2013, the rules should be comparable to the liquidity coverage ratio set out in the international framework for liquidity risk measurement, standards and monitoring of the Basel Committee on Banking Supervision (‘BCBS’), taking into account Union and national specificities. Until the full implementation of the liquidity coverage requirement from 1 January 2018, Member States should be able to apply a liquidity coverage requirement up to 100 % for credit institutions in accordance with national law.

(3)

Consistent with BCBS liquidity standards, rules should be adopted to define the liquidity coverage requirement as a ratio of a credit institution's buffer of ‘liquid assets’ to its ‘net liquidity outflows’ over a 30 calendar day stress period. ‘Net liquidity outflows’ should be calculated by deducting the credit institution's liquidity inflows from its liquidity outflows. The liquidity coverage ratio should be expressed as a percentage and set at a minimum level of 100 %, when fully implemented, which indicates that a credit institution holds sufficient liquid assets to meet its net liquidity outflows during a 30-day stress period. During such a period, a credit institution should be able to convert quickly its liquid assets into cash without recourse to central bank liquidity or public funds, which may result in its liquidity coverage ratio falling temporarily below the 100 % level. Should that occur or be expected to occur at any time, credit institutions should comply with the specific requirements laid down in Article 414 of Regulation (EU) No 575/2013 for a timely restoration of their liquidity coverage ratio to the minimum level.

(4)

Only freely transferable assets that can be converted quickly into cash in private markets within a short timeframe and without significant loss in value should be defined as ‘liquid assets’ for the purposes of credit institutions' liquidity buffers. Consistent with Part Six of Regulation (EU) No 575/2013 and the BCBS classification of liquid assets, appropriate rules should differentiate between assets of extremely high liquidity and credit quality or level 1 assets, and assets of high liquidity and credit quality or level 2 assets. The latter should be further divided into level 2A and 2B assets. Credit institutions should hold an adequately diversified buffer of liquid assets, having regard to their relative liquidity and credit quality. Accordingly, each level and sub-level should be subject to specific requirements on haircuts and limits of the overall buffer and, where appropriate, differentiated requirements should be applied between levels or sub-levels and between categories of liquid assets in the same level or sub-level, which should be more stringent the lower their liquidity classification.

(5)

Certain general and operational requirements should be applied to liquid assets to ensure they can be converted into cash within a short timeframe, subject to some exceptions for specified level 1 assets where appropriate. These requirements should specify that liquid assets should be held free from any obstacle preventing their disposal, easy to value and listed on recognised exchanges or tradable on active sale or repurchase markets. They should also ensure that the credit institution's liquidity management function has access to and control of its liquid assets at all times and that the assets comprising the liquidity buffer are appropriately diversified. Diversification is important to ensure that a credit institution's ability to rapidly liquidate liquid assets without a significant loss in value is not compromised by those assets being vulnerable to a common risk factor. Credit institutions should also be required to ensure consistency of the currency denomination of their liquid assets and their net liquidity outflows, to prevent an excessive currency mismatch from compromising their ability to use their liquidity buffer to meet liquidity outflows in a specific currency in a stress period.

(6)

In accordance with the recommendations made by the European Banking Authority (EBA) in its report of 20 December 2013, prepared pursuant to Article 509(3) and (5) of Regulation (EU) No 575/2013, all types of bonds issued or guaranteed by Member States' central governments and central banks as well as those issued or guaranteed by supranational institutions should be given level 1 status. As the EBA noted, there are strong supervisory arguments for not discriminating between various Member States because the exclusion of some sovereign bonds from level 1 would create incentives to invest in other sovereign bonds within the Union, which would result in the fragmentation of the internal market and increase the risk of mutual contagion in a crisis between credit institutions and their sovereigns (the ‘bank-sovereign nexus’). As regards third countries, level 1 status should be given to exposures to central banks and sovereigns which are assigned a 0 % risk weight under the credit risk rules in Title II of Part 3 of Regulation (EU) No 575/2013, as is provided for in the BCBS standard. Exposures to regional governments, local authorities and public sector entities should be given level 1 status only where they are treated as exposures to their central government and the latter benefits from a 0 % risk weight in accordance with the same credit risk rules. The same status should apply to exposures to 0 % risk-weighted multilateral development banks and international organisations. Given the extremely high liquidity and credit quality demonstrated by those assets, credit institutions should be allowed to hold them in their buffers without limit and they should not be subject to a haircut or a diversification requirement.

(7)

Assets issued by credit institutions should generally not be recognised as liquid assets, but level 1 treatment should be conferred upon bank assets supported by Member States governments, such as promotional and government-owned lenders as well as private bank assets with an explicit State guarantee. The latter constitute a legacy from the financial crisis that should be phased-out and, accordingly, only bank assets with a government guarantee granted or committed to prior to 30 June 2014 should be eligible as liquid assets. Similarly, senior bonds issued by certain specified asset management agencies of certain Member States should be treated as level 1 assets subject to the same requirements applicable to exposures to the central government of their respective Member State but only with a time-limited effect.

(8)

Covered bonds are debt instruments issued by credit institutions and secured by a cover pool of assets which typically consist of mortgage loans or public sector debt to which investors have a preferential claim in the event of default. Their secured nature and certain additional safety features, such as the requirement on the issuer to replace non-performing assets in the cover pool and maintain the cover pool at a value exceeding the par value of the bonds (‘asset coverage requirement’), have contributed to make covered bonds relatively low-risk, yield-bearing instruments with a key funding role in mortgage markets of most Member States. In certain Member States outstanding covered bond issuance exceeds the pool of outstanding government bonds. Certain covered bonds of credit quality step 1, in particular, exhibited an excellent liquidity performance during the period from 1 January 2008 to 30 June 2012 analysed by the EBA in its report. Nevertheless the EBA recommended treating these covered bonds as level 2A assets to align with BCBS standards. However, in the light of the considerations made above about their credit quality, liquidity performance and role in the funding markets of the Union, it is appropriate for these credit quality step 1 covered bonds to be treated as level 1 assets. In order to avoid excessive concentration risks and unlike other level 1 assets, the holdings of credit quality step 1 covered bonds in the liquidity buffer should be subject to a 70 % cap of the overall buffer, a minimum 7 % haircut and to the diversification requirement.

(9)

Covered bonds of credit quality step 2 should be recognised as level 2A assets subject to the same cap (40 %) and haircut (15 %) applicable to other liquid assets of this level. This can be justified on the basis of available market data which indicate that credit quality step 2 covered bonds exhibited greater liquidity than other comparable level 2A and 2B assets, such as residential mortgage-backed securities (‘RMBSs’) of credit quality step 1. Furthermore, permitting these covered bonds to qualify for the purposes of the liquidity buffer would contribute to diversifying the pool of available assets within the buffer and prevent an undue discrimination or a cliff effect between them and covered bonds of credit quality step 1. It should be noted, however, that a significant proportion of these covered bonds became credit quality step 2 as a result of the downgrade in the rating of the Member State's central government where their issuer was established. This reflected the country ceiling typically included in the methodologies of rating agencies which determines that financial instruments may not be rated over a certain level relative to their respective sovereign rating. Hence, country ceilings precluded the covered bonds issued in those Member States from reaching credit quality step 1, irrespective of their credit quality, which in turn reduced their liquidity compared with covered bonds of similar quality issued in Member States that were not downgraded. Funding markets within the Union have become greatly fragmented as a result, which highlights the need to find an appropriate alternative to external ratings as one of criteria in prudential regulation to classify the liquidity and credit risk of covered bonds and other categories of assets. In accordance with Article 39b(1) of Regulation (EU) No 1060/2009 of the European Parliament and of the Council (2), the Commission must report by 31 December 2015 on alternative tools to credit ratings, with a view to deleting all references to credit ratings in Union law for regulatory purposes by 1 January 2020.

(10)

In relation to asset-backed securities (‘ABS’), the EBA had recommended, consistent with its own empirical findings and with the BCBS standard, that only RMBSs of credit quality step 1 be recognised as level 2B assets, subject to a 25 % haircut. It is also appropriate to deviate from this recommendation and expand level 2B eligibility to certain ABSs backed by other assets. A broader range of eligible subcategories of assets would increase diversification within the liquidity buffer and facilitate the financing of the real economy. Furthermore, as available market data points to a low correlation between ABSs and other liquid assets such as government bonds, the bank-sovereign nexus would be weakened and fragmentation in the internal market would be mitigated. In addition, there is evidence that investors tend to hoard high quality ABSs with short weighted-average life and high prepayments during periods of financial instability, as these convert into cash quickly and can be relied upon as a safe source of liquidity. This is particularly the case of ABSs backed by loans and leases for the financing of motor vehicles (‘auto loan ABSs’), which exhibited price volatility and average spreads comparable to RMBSs during the 2007-2012 period. Certain sections of consumer credit ABSs, such as credit cards, also showed comparable good levels of liquidity. Lastly, allowing ABSs backed by real economy assets, such as those mentioned already and loans to SMEs, could contribute to economic growth as it would send a positive signal to investors in relation to these assets. Appropriate rules should therefore recognise ABSs backed not just by residential mortgage loans, but also by auto loans, consumer credit and SME loans as level 2B assets. However to preserve the integrity and functionality of the liquidity buffer, their eligibility should be subject to certain high quality requirements consistent with the criteria to be applied to simple, transparent and standardised securitisations in other financial sectorial legislation. For RMBSs in particular, high quality requirements should include complying with certain ratios on loan-to-value or loan-to-income, but those ratios should not apply to RMBS issued before the starting date of application of the liquidity coverage requirement. To account for the less high liquidity observed in consumer credit and SME loan ABSs relative to RMBSs and auto loan ABSs, the former should be subject to a higher haircut (35 %). All ABSs should be subject, like other level 2B assets, to the overall 15 % cap of the liquidity buffer and to the diversification requirement.

(11)

The rules in relation to the classification, requirements, caps and haircuts for the remaining level 2A and 2B assets should align closely with the BCBS's and the EBA's recommendations. Shares and units in collective investment undertakings (‘CIU’), on the other hand, should be treated as liquid assets of the same level and category as the assets underlying the collective undertaking.

(12)

It is also appropriate in determining the liquidity coverage ratio to take into account the centralised management of liquidity in cooperative and institutional protection scheme networks where the central institution or body plays a role akin to a central bank because the members of the network do not typically have direct access to the latter. Appropriate rules should, therefore, recognise as liquid assets the sight deposits which are made by the members of the network with the central institution and other liquidity funding available to those from the central institution. Deposits which do not qualify as liquid assets should benefit from the preferential outflow rates allowed for operational deposits.

(13)

The outflow rate for stable retail deposits should be set at a default rate of 5 %, but a preferential outflow rate of 3 % should be allowed to all credit institutions affiliated to a deposit guarantee scheme in a Member State that meets certain stringent criteria. First, account should be taken of the implementation of the Deposit Guarantee Scheme Directive 2014/49/EU of the European Parliament and of the Council (3) by Member States. Second, the scheme of a Member State should comply with specific requirements relating to the repayment period, ex-ante funding and access to additional financial means in the event of a large call on its reserves. Last, the application of the preferential 3 % rate should be subject to the Commission's prior approval, which should be granted only where the Commission is satisfied that the deposit guarantee scheme of the Member State complies with the above criteria and there are no overriding concerns regarding the functioning of the internal market for retail deposits. In any event, the 3 % preferential rate for stable retail deposits should not be applicable before 1 January 2019.

(14)

Credit institutions should be able to identify other retail deposits subject to higher run-off rates. Appropriate rules based on the EBA Guidelines on retail deposits subject to different outflows should set out the criteria to identify those retail deposits on the basis of their specific features, namely the size of the total deposit, the nature of the deposit, the remuneration, the probability of withdrawal and whether the depositor is resident or non-resident.

(15)

It may not be assumed that credit institutions will always receive liquidity support from other undertakings belonging to the same group or to the same institutional protection scheme when they experience difficulties in meeting their payment obligations. However, where no waiver has been granted for the application of the liquidity coverage ratio at individual level in accordance with Articles 8 or 10 of Regulation (EU) No 575/2013, liquidity flows between two credit institutions belonging to the same group or to the same institutional protection scheme should in principle receive symmetrical inflow and outflow rates to avoid the loss of liquidity in the internal market, provided that all the necessary safeguards are in place and only with the prior approval of the competent authorities involved. Such preferential treatment should only be given to cross-border flows on the basis of additional objective criteria, including the low liquidity risk profile of the provider and the receiver.

(16)

In order to prevent credit institutions from relying solely on anticipated inflows to meet their liquidity coverage ratio, and also to ensure a minimum level of liquid assets holdings, the amount of inflows that can offset outflows should be capped at 75 % of total expected outflows. However, taking into account the existence of specialised business models, certain exemptions to this cap, either full or partial, should be permitted to give effect to the principle of proportionality and subject to the prior approval of the competent authorities. That should include an exemption for intra-group and intra-institutional protection scheme flows and credit institutions specialised in pass-through mortgage lending or in leasing and factoring. In addition, credit institutions specialised in financing for the acquisition of motor vehicles or in consumer credit loans should be allowed to apply a higher cap of 90 %. Those exemptions should be available at both the individual and consolidated level, but only where certain criteria are fulfilled.

(17)

The liquidity coverage ratio should apply to credit institutions both on an individual and consolidated basis, unless the competent authorities waive the application on an individual basis in accordance with Articles 8 or 10 of Regulation (EU) No 575/2013. The consolidation of subsidiary undertakings in third countries should take due account of the liquidity coverage requirements applicable in those countries. Accordingly, consolidation rules in the Union should not give a more favourable treatment to liquid assets, liquidity outflows or inflows in third country subsidiary undertakings than that which is available under the national law of those third countries.

(18)

In accordance with Article 508(2) of Regulation (EU) No 575/2013, the Commission must report to the co-legislators by no later than 31 December 2015 on whether and how the liquidity coverage requirement laid down in Part Six should apply to investment firms. Until that provision starts to apply, investment firms should remain subject to the national law of Member States on the liquidity coverage requirement. However, investment firms should be subject to the liquidity coverage ratio laid down in this Regulation on a consolidated basis, where they form part of banking groups.

(19)

Credit institutions are required to report to their competent authorities the liquidity coverage requirement as specified in detail in this Regulation in accordance with Article 415 of Regulation (EU) No 575/2013.

(20)

In order to give credit institutions sufficient time to comply with the detailed liquidity coverage requirement in full, its introduction should be phased-in in accordance with the timetable laid down in Article 460(2) of Regulation (EU) No 575/2013, starting with a minimum of 60 % from 1 October 2015 rising to 100 % on 1 January 2018,

(a)

third country assets which meet the requirements laid down in Title II and which are held by a subsidiary undertaking in a third country shall not be recognised as liquid assets for consolidated purposes where they do not qualify as liquid assets under the national law of the third country setting out the liquidity coverage requirement;

(b)

liquidity outflows in a subsidiary undertaking in a third country which are subject under the national law of that third country setting out the liquidity coverage requirement to higher percentages than those specified in Title III shall be subject to consolidation in accordance with the higher rates specified in the national law of the third country;

(c)

liquidity inflows in a subsidiary undertaking in a third country which are subject under the national law of that third country setting out the liquidity coverage requirement to lower percentages than those specified in Title III shall be subject to consolidation in accordance with the lower rates specified in the national law of the third country;

(d)

investment firms within the group shall be subject to Article 4 of this Regulation on a consolidated basis and to Article 412 of Regulation (EU) No 575/2013 in relation to the definition of liquid assets, liquidity outflows and inflows for both individual and consolidated purposes. Other than as specified in this point, investment firms shall remain subject to the detailed liquidity coverage ratio requirement for investment firms as laid down in the national law of Member States pending the specification of a liquidity coverage ratio requirement in accordance with Article 508 of Regulation (EU) No 575/2013;

(e)

at a consolidated level the amount of inflows arising from a specialised credit institution referred to in Article 33 paragraphs (3) and (4) shall only be recognised up to the amount of the outflows arising from the same undertaking.

(1)

‘level 1 assets’ means assets of extremely high liquidity and credit quality as referred to in the second subparagraph of Article 416(1) of Regulation (EU) No 575/2013;

(2)

‘level 2 assets’ means assets of high liquidity and credit quality as referred to in the second subparagraph of Article 416(1) of Regulation (EU) No 575/2013. level 2 assets are further subdivided into level 2A and 2B assets in accordance with Chapter 2 of Title II of this Regulation;

(3)

‘liquidity buffer’ means the amount of liquid assets that a credit institution holds in accordance with Title II of this Regulation;

(4)

‘reporting currency’ means the currency in which the liquidity items referred to in Titles II and III of Part Six of Regulation (EU) No 575/2013 must be reported to the competent authority in accordance with Article 415(1) of that Regulation;

(5)

‘asset coverage requirement’ means the ratio of assets to liabilities as determined for credit enhancement purposes in relation to covered bonds by the national law of a Member State or a third country;

(6)

‘SME’ means a micro, small and medium-sized enterprise as defined in Commission Recommendation 2003/361/EC (5);

(7)

‘net liquidity outflows’ means the amount which results from deducting a credit institution's liquidity inflows from its liquidity outflows in accordance with Title III of this Regulation;

(8)

‘retail deposits’ means a liability to a natural person or to an SME, where the SME would qualify for the retail exposure class under the standardised or IRB approaches for credit risk, or a liability to a company which is eligible for the treatment set out in Article 153(4) of Regulation (EU) No 575/2013, and where the aggregate deposits by such SME or company on a group basis do not exceed EUR 1 million;

(9)

‘financial customer’ means a customer that performs one or more of the activities listed in Annex I to Directive 2013/36/EU as its main business, or is one of the following:

(10)

‘personal investment company’ (‘PIC’) means an undertaking or a trust whose owner or beneficial owner, respectively, is a natural person or a group of closely related natural persons, which was set up with the sole purpose of managing the wealth of the owners and which does not carry out any other commercial, industrial or professional activity. The purpose of the PIC may include other ancillary activities such as segregating the owners' assets from corporate assets, facilitating the transmission of assets within a family or preventing a split of the assets after the death of a member of the family, provided these are connected to the main purpose of managing the owners' wealth;

(11)

‘stress’ shall mean a sudden or severe deterioration in the solvency or liquidity position of a credit institution due to changes in market conditions or idiosyncratic factors as a result of which there may be a significant risk that the credit institution becomes unable to meet its commitments as they fall due within the next 30 calendar days;

(12)

‘margin loans’ means collateralised loans extended to customers for the purpose of taking leveraged trading positions.

(a)

the run-off of a significant proportion of its retail deposits;

(b)

a partial or total loss of unsecured wholesale funding capacity, including wholesale deposits and other sources of contingent funding such as received committed or uncommitted liquidity or credit lines;

(c)

a partial or total loss of secured, short-term funding;

(d)

additional liquidity outflows as a result of a credit rating downgrade of up to three notches;

(e)

increased market volatility affecting the value of collateral or its quality or creating additional collateral needs;

(f)

unscheduled draws on liquidity and credit facilities;

(g)

potential obligation to buy-back debt or to honour non-contractual obligations.

(a)

the general requirements laid down in Article 7;

(b)

the operational requirements laid down in Article 8;

(c)

the respective eligibility criteria for their classification as a level 1 or level 2 asset in accordance with Chapter 2.

(a)

assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed but not yet funded credit lines available to the credit institution. This shall include assets placed by a credit institution with the central institution in a cooperative network or institutional protection scheme. Credit institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification set out in Chapter 2, starting with assets ineligible for the liquidity buffer;

(b)

assets that the credit institution has received as collateral for credit risk mitigation purposes in reverse repo or securities financing transactions and that the credit institution may dispose of.

(a)

another credit institution, unless the issuer is a public sector entity referred to in point (c) of Article 10(1) and in points (a) and (b) of Article 11(1), the asset is a covered bond referred to in point (f) of Article 10(1) and points (c) and (d) of Article 11(1) or the asset belongs to the category described in point (e) of Article 10(1);

(b)

an investment firm;

(c)

an insurance undertaking;

(d)

a reinsurance undertaking;

(e)

a financial holding company;

(f)

a mixed financial holding company;

(g)

any other entity that performs one or more of the activities listed in Annex I to Directive 2013/36/EU. For the purposes of this Article, SSPEs shall be deemed not included within the entities referred to in this point.

(a)

historical evidence of market breadth and depth as proven by low bid-ask spreads, high trading volume and a large and diverse number of market participants;

(b)

the presence of a robust market infrastructure.

(a)

banknotes and coins referred to in point (a) of Article 10(1);

(b)

the exposures to central banks referred to in points (b) and (d) of Article 10(1) and in point (b) of Article 11(1);

(c)

the restricted-use committed liquidity facility referred to in point (d) of Article 12(1);

(d)

the deposits and other funding in cooperative networks and institutional protection schemes referred to in Article 16.

(a)

the following categories of level 1 assets:

(b)

the categories of level 1 assets representing claims on or guaranteed by the central or regional governments, local authorities or public sector entities referred to Article 10(1)(c) and (d), provided that the credit institution holds the relevant asset to cover stressed net liquidity outflows incurred in the currency of the Member State or third country or the asset is issued by the central or regional governments, local authorities or public sector entities of the credit institution's home Member State;

(c)

the restricted-use committed liquidity facility referred to in point (d) of Article 12(1).

(a)

placing the liquid assets in a separate pool under the direct management of the liquidity function and with the sole intent of using them as a source of contingent funds, including during stress periods;

(b)

putting in place internal systems and controls to give the liquidity management function effective operational control to monetise the holdings of liquid assets at any point in the 30 calendar day stress period and to access the contingent funds without directly conflicting with any existing business or risk management strategies. In particular, an asset shall not be included in the liquidity buffer where its sale without replacement throughout the 30 calendar day stress period would remove a hedge that would create an open risk position in excess of the internal limits of the credit institution;

(c)

a combination of options (a) and (b), provided that the competent authority has deemed such combination acceptable.

(a)

test the access to the market for those assets and their usability;

(b)

check that the credit institution's processes for the timely monetisation of assets are effective;

(c)

minimise the risk of sending a negative signal to the market as a result of the credit institution's monetising its assets during stress periods.

(a)

the credit institution puts in place appropriate internal arrangements in accordance with paragraphs 2 and 3 to ensure that those assets continue to be readily available and under the control of the liquidity management function;

(b)

the net liquidity outflows and inflows that would result in the event of an early close-out of the hedge are taken into account in the valuation of the relevant asset in accordance with Article 9.

(a)

whether the credit institution has the ability to do any of the following:

(b)

the impact of sudden, adverse exchange rate movements on existing mismatched positions and on the effectiveness of any foreign exchange hedges in place.

(a)

coins and banknotes;

(b)

the following exposures to central banks:

(c)

assets representing claims on or guaranteed by the following central or regional governments, local authorities or public sector entities:

(d)

assets representing claims on or guaranteed by the central government or the central bank of a third country which is not assigned a credit quality step 1 credit assessment by a nominated ECAI in accordance with Article 114(2) of Regulation (EU) No 575/2013, provided that in this case the credit institution may only recognise the asset as level 1 to cover stressed net liquidity outflows incurred in the same currency in which the asset is denominated.

Where the asset is not denominated in the domestic currency of the third country, the credit institution may only recognise the asset as level 1 up to the amount of the credit institution's stressed net liquidity outflows in that foreign currency corresponding to its operations in the jurisdiction where the liquidity risk is being taken;

(e)

assets issued by credit institutions which meet at least one of the following two requirements:

(f)

exposures in the form of extremely high quality covered bonds, which shall comply with all of the following requirements:

(g)

assets representing claims on or guaranteed by the multilateral development banks and the international organisations referred to in Article 117(2) and Article 118, respectively, of Regulation (EU) No 575/2013.

(a)

assets representing claims on or guaranteed by regional governments, local authorities or public sector entities in a Member State, where exposures to them are assigned a risk weight of 20 % in accordance with Article 115(1) and (5) and Article 116(1), (2) and (3) of Regulation (EU) No 575/2013, as applicable;

(b)

assets representing claims on or guaranteed by the central government or the central bank of a third country or by a regional government, local authority or public sector entity in a third country, provided that they are assigned a 20 % risk weight in accordance with Articles 114(2), 115 or 116 of Regulation (EU) No 575/2013, as applicable;

(c)

exposures in the form of high quality covered bonds, which shall comply with all of the following requirements:

(d)

exposures in the form of covered bonds issued by credit institutions in third countries, which shall comply with all of the following requirements:

(e)

corporate debt securities which meet all of the following requirements:

(a)

exposures in the form of asset-backed securities meeting the requirements laid down in Article 13;

(b)

corporate debt securities which meet all of the following requirements:

(c)

shares, provided that they meet all of the following requirements:

(d)

restricted-use committed liquidity facilities that may be provided by the ECB, the central bank of a Member State or the central bank of a third country, provided that the requirements laid down in Article 14 are met;

(e)

exposures in the form of high quality covered bonds which shall comply with all of the following requirements:

(f)

for credit institutions which in accordance with their statutes of incorporation are unable for reasons of religious observance from holding interest bearing assets, non-interest bearing assets constituting a claim on or guaranteed by central banks or by the central government or the central bank of a third country or by a regional government, local authority or public sector entity in a third country, provided that those assets have a credit assessment by a nominated ECAI of at least credit quality step 5 in accordance with Article 114 of Regulation (EU) No 575/2013, or the equivalent credit-quality step in the event of a short-term credit assessment.

(a)

the applicable haircut set out in Article 13(14) for level 2B securitisations;

(b)

a 50 % haircut for corporate debt securities referred to in paragraph (1)(b);

(c)

a 50 % haircut for shares referred to in paragraph 1(c);

(d)

a 30 % haircut for covered bond programmes or issues referred to in paragraph (1)(e);

(e)

a 50 % haircut for non-interest bearing assets referred to in paragraph 1(f).

(a)

the available data in respect of their market liquidity, including trading volumes, observed bid-offer spreads, price volatility and price impact; and

(b)

other factors relevant to their liquidity, including the historical evidence of the breadth and depth of the market for those non-interest bearing assets, the number and diversity of market participants and the presence of a robust market infrastructure.

(a)

the position has been assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Articles 251 or 261 of Regulation (EU) No 575/2013 or the equivalent credit quality step in the event of a short term credit assessment;

(b)

the position is in the most senior tranche or tranches of the securitisation and possesses the highest level of seniority at all times during the ongoing life of the transaction. For these purposes, a tranche shall be deemed to be the most senior where after the delivery of an enforcement notice and where applicable an acceleration notice, the tranche is not subordinated to other tranches of the same securitisation transaction or scheme in respect of receiving principal and interest payments, without taking into account amounts due under interest rate or currency derivative contracts, fees or other similar payments in accordance with Article 261 of Regulation (EU) No 575/2013;

(c)

the underlying exposures have been acquired by the SSPE within the meaning of Article 4(1)(66) of Regulation (EU) No 575/2013 in a manner that is enforceable against any third party and are beyond the reach of the seller (originator, sponsor or original lender) and its creditors including in the event of the seller's insolvency;

(d)

the transfer of the underlying exposures to the SSPE may not be subject to any severe clawback provisions in the jurisdiction where the seller (originator, sponsor or original lender) is incorporated. This includes but is not limited to provisions under which the sale of the underlying exposures can be invalidated by the liquidator of the seller (originator, sponsor or original lender) solely on the basis that it was concluded within a certain period before the declaration of the seller's insolvency or provisions where the SSPE can prevent such invalidation only if it can prove that it was not aware of the insolvency of the seller at the time of sale;

(e)

the underlying exposures have their administration governed by a servicing agreement which includes servicing continuity provisions that ensure, at a minimum, that a default or insolvency of the servicer does not result in a termination of servicing;

(f)

the documentation governing the securitisation includes continuity provisions that ensure, at a minimum, the replacement of derivative counterparties and of liquidity providers upon their default or insolvency, where applicable;

(g)

the securitisation position is backed by a pool of homogeneous underlying exposures, which all belong to only one of the following subcategories, or by a pool of homogeneous underlying exposures which combines residential loans referred to in points (i) and (ii):

(h)

the position is not in a resecuritisation or a synthetic securitisation as referred to in Articles 4(63) and 242(11), respectively, of Regulation (EU) No 575/2013;

(i)

the underlying exposures do not include transferable financial instruments or derivatives, except financial instruments issued by the SSPE itself or other parties within the securitisation structure and derivatives used to hedge currency risk and interest rate risk;

(j)

at the time of issuance of the securitisation or when incorporated in the pool of underlying exposures at any time after issuance, the underlying exposures do not include exposures to credit-impaired obligors (or where applicable, credit-impaired guarantors), where a credit-impaired obligor (or credit-impaired guarantor) is a borrower (or guarantor) who:

(k)

at the time of issuance of the securitisation or when incorporated in the pool of underlying exposures at any time after issuance, the underlying exposures do not include exposures in default within the meaning of Article 178(1) of Regulation (EU) No 575/2013.

(a)

where the securitisation has been set up without a revolving period or the revolving period has terminated and where an enforcement or an acceleration notice has been delivered, principal receipts from the underlying exposures are passed to the holders of the securitisation positions via sequential amortisation of the securitisation positions and no substantial amount of cash is trapped in the SSPE on each payment date;

(b)

where the securitisation has been set up with a revolving period, the transaction documentation provides for appropriate early amortisation events, which shall include at a minimum all of the following:

(a)

25 % for securitisations backed by the subcategories of assets referred to in points (g)(i), (ii) and (iv) of paragraph 2;

(b)

35 % for securitisations backed by the subcategories of assets referred to in points (g)(iii) and (v) of paragraph 2.

(a)

during a non-stress period, the facility is subject to a commitment fee on the total committed amount which is at least the greater of the following:

During a stress period, the central bank may reduce the commitment fee described in the first subparagraph of this point, provided that the minimum requirements applicable to liquidity facilities under the alternative liquidity approaches in accordance with Article 19 are met;

(b)

the facility is backed by unencumbered assets of a type specified by the central bank. The assets provided as collateral shall fulfil all of the following criteria:

(c)

the facility is compatible with the counterparty policy framework of the central bank;

(d)

the commitment term of the facility exceeds the 30 calendar day stress period referred to in Article 4;

(e)

the facility is not revoked by the central bank prior to its contractual maturity and no further credit decision is taken for as long as the credit institution concerned continues to be assessed as solvent;

(f)

there is a formal policy published by the central bank stating its decision to grant restricted-use committed liquidity facilities, the conditions governing the facility and the types of credit institutions that are eligible to apply for those facilities.

(a)

the requirements in Article 132(3) of Regulation (EU) No 575/2013 are complied with;

(b)

the CIU invests only in liquid assets and derivatives, in the latter case only to the extent necessary to mitigate interest rate, currency or credit risk in the portfolio.

(a)

0 % for coins and banknotes and exposures to central banks referred to in Article 10(1)(b);

(b)

5 % for level 1 assets other than extremely high quality covered bonds;

(c)

12 % for extremely high quality covered bonds referred to in Article 10(1)(f);

(d)

20 % for level 2A assets;

(e)

30 % for level 2B securitisations backed by the subcategories of assets referred to in points (i), (ii) and (iv) of Article 13(2)(g);

(f)

35 % for level 2B covered bonds referred to in Article 12(1)e;

(g)

40 % for level 2B securitisations backed by the subcategories of assets referred to in points (iii) and (v) of Article 13(2)(g); and

(h)

55 % for level 2B corporate debt securities referred to in Article 12(1)(b), shares referred to in Article 12(1)(c) and non-interest bearing assets referred to in Article 12(1)(f).

(a)

where the credit institution is aware of the exposures underlying the CIU, it may look-through to those underlying exposures to assign them the appropriate haircut in accordance with paragraph 2;

(b)

where the credit institution is not aware of the exposures underlying the CIU, it must assume that the CIU invests, up to the maximum amount allowed under its mandate, in ascending order in liquid assets as these are classified for the purposes of paragraph 2, starting with those referred to in point (g) of paragraph 2 and until the maximum total investment limit is reached. The same approach shall be applied to determine the liquidity level of the underlying assets where the credit institution is not aware of the exposures underlying the CIU.

(a)

the depository institution of the CIU, provided that the CIU invests exclusively in securities and deposits all such securities at this depository institution; or

(b)

for other CIUs, the CIU management company, provided that the CIU management company meets the requirements laid down in Article 132(3)(a) of Regulation (EU) No 575/2013.

(a)

where, in accordance with the national law or the legally binding documents governing the scheme or network, the central institution is obliged to hold or invest the deposits in liquid assets of a specified level or category, the deposits shall be treated as liquid assets of that same level or category in accordance with this Regulation;

(b)

where the central institution is not obliged to hold or invest the deposits in liquid assets of a specified level or category, the deposits shall be treated as level 2B assets in accordance with this Regulation and their outstanding amount shall be subject to a minimum haircut of 25 %.

(a)

a minimum of 60 % of the liquidity buffer is to be composed of level 1 assets;

(b)

a minimum of 30 % of the liquidity buffer is to be composed of level 1 assets excluding extremely high quality covered bonds referred to in Article 10(1)(f);

(c)

a maximum of 15 % of the liquidity buffer may be held in level 2B assets.

(a)

the requirement on currency consistency set out in Article 8(6) shall not apply in relation to that currency;

(b)

the credit institution may cover the deficit of liquid assets in a currency with credit facilities from the central bank in a Member State or third country of that currency, provided that the facility complies with all the following requirements:

(c)

where there is a deficit of level 1 assets but there are sufficient level 2A assets, the credit institution may hold additional level 2A assets in the liquidity buffer and the caps by asset level set out in Article 17 shall be deemed amended accordingly. These additional level 2A assets shall be subject to a minimum haircut equal to 20 %. Any level 2B assets held by the credit institution shall remain subject to the haircuts applicable in each case in accordance with this Chapter.

(a)

the sum of the liquidity outflows as defined in Chapter 2;

(b)

the sum of liquidity inflows as defined in Chapter 3, calculated as follows:

(a)

the current outstanding amount for stable retail deposits and other retail deposits in accordance with Articles 24, 25 and 26;

(b)

the current outstanding amounts of other liabilities that become due, can be called for pay-out by the issuer or by the provider of the funding or entail an expectation by the provider of the funding that the credit institution would repay the liability during the next 30 calendar days determined in accordance with Articles 27 and 28;

(c)

the additional outflows determined in accordance with Article 30;

(d)

the maximum amount that can be drawn down during the next 30 calendar days from undrawn committed credit and liquidity facilities determined in accordance with Article 31;

(e)

the additional outflows identified in the assessment in accordance with Article 23.

(a)

other off-balance sheet and contingent funding obligations, including, but not limited to uncommitted funding facilities,

(b)

undrawn loans and advances to wholesale counterparties;

(c)

mortgage loans that have been agreed but not yet drawn down;

(d)

credit cards;

(e)

overdrafts;

(f)

planned outflows related to renewal or extension of new retail or wholesale loans;

(g)

planned derivatives payables;

(h)

trade finance off-balance sheet related products.

(a)

part of an established relationship making withdrawal highly unlikely; or

(b)

held in a transactional account.

(a)

has an active contractual relationship with the credit institution of at least 12 months duration;

(b)

has a borrowing relationship with the credit institution for residential loans or other long term loans;

(c)

has at least one other active product, other than a loan, with the credit institution.

(a)

the deposit guarantee scheme has available financial means, as referred to in Article 10 of Directive 2014/49/EU, raised ex ante by contributions made by members at least annually;

(b)

the deposit guarantee scheme has adequate means of ensuring ready access to additional funding in the event of a large call on its reserves, including access to extraordinary contributions from member credit institutions and adequate alternative funding arrangements to obtain short-term funding from public or private third parties;

(c)

the deposit guarantee scheme ensures a seven working day repayment period as referred to in Article 8(1) of Directive 2014/49/EU from the date of application of the 3 % outflow rate.

(a)

the total deposit balance, including all the client's deposit accounts at that credit institution or group, exceeds EUR 500 000;

(b)

the deposit is an internet only account;

(c)

the deposit offers an interest rate that fulfils any of the following conditions:

(d)

the deposit was originally placed as fixed-term with an expiry date maturing within the 30 calendar day period or the deposit presents a fixed notice period shorter than 30 calendar days, in accordance with contractual arrangements, other than those deposits that qualify for the treatment provided for in paragraph 4;

(e)

for credit institutions established in the Union, the depositor is resident in a third country or the deposit is denominated in a currency other than the euro or the domestic currency of a Member State. For credit institutions or branches in third countries, the depositor is a non-resident in the third country or the deposit is denominated in another currency than the domestic currency of the third country;

(a)

where the retail deposits fulfil the criterion in point (a) or two of the criteria in points (b) to (e) of paragraph 2, an outflow rate of between 10 % and 15 % shall be applied;

(b)

where the retail deposits fulfil point (a) of paragraph 2 and at least another criterion referred to in paragraph 2, or three or more criteria of paragraph 2, an outflow rate of between 15 % and 20 % shall be applied.

(a)

within 30 calendar days, the depositor is not allowed to withdraw the deposit; or

(b)

for early withdrawals within 30 calendar days, the depositor has to pay a penalty that includes the loss of interest between the date of withdrawal and the contractual maturity date plus a material penalty that does not have to exceed the interest due for the time that elapsed between the date of deposit and the date of withdrawal.

(a)

the interdependent inflow is directly linked to the outflow and is not considered in the calculation of liquidity inflows in Chapter 3;

(b)

the interdependent inflow is required pursuant to a legal, regulatory or contractual commitment;

(c)

the interdependent inflow meets one of the following conditions:

(a)

by the depositor in order to obtain clearing, custody, cash management or other comparable services in the context of an established operational relationship from the credit institution;

(b)

in the context of common task sharing within an institutional protection scheme meeting the requirements of Article 113(7) of Regulation (EU) No 575/2013 or within a group of cooperative credit institutions permanently affiliated to a central body meeting the requirements of Article 113(6) of that Regulation, or as a legal or contractually established deposit by another credit institution that is a Member of the same institutional protection scheme or cooperative network, provided those deposits are not recognised as liquid assets for the depositing credit institution as referred to in paragraph 3 and Article 16;

(c)

by the depositor in the context of an established operational relationship other than that mentioned in point (a);

(d)

by the depositor to obtain cash clearing and central institution services and where the credit institution belongs to one of the networks or schemes referred to in Article 16.

(a)

the remuneration of the account is priced at least 5 basis points below the prevailing rate for wholesale deposits with comparable characteristics, but need not be negative;

(b)

the deposit is held in specifically designated accounts and priced without creating economic incentives for the depositor to maintain funds in the deposit in excess of what is needed for the operational relationship;

(c)

material transactions are credited and debited on a frequent basis on the account considered;

(d)

one of the following criteria is met:

(a)

0 % if they are collateralised by assets that would qualify as level 1 assets in accordance with Article 10, with the exception of extremely high quality covered bonds referred to in Article 10(1)(f), or if the lender is a central bank;

(b)

7 % if they are collateralised by assets that would qualify as extremely high quality covered bonds referred to in Article 10(1)(f);

(c)

15 % if they are collateralised by assets that would qualify as level 2A assets in accordance with Article 11;

(d)

25 %:

(e)

35 % if they are collateralised by the subcategories of assets referred to in points (iii) or (v) of Article 13(2)(g);

(f)

50 % if they are collateralised by:

(g)

100 % where they are collateralised by assets that would not qualify as liquid assets in accordance with Title II, with the exception of transactions covered by point (d)(ii) of this paragraph or if the lender is a central bank.

(a)

there are reasons to expect a lower outflow even under a combined market and idiosyncratic stress of the provider;

(b)

the counterparty is the parent or subsidiary institution of the credit institution or another subsidiary of the same parent institution or linked to the institution by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC (10) or a member of the same institutional protection scheme referred to in Article 113(7) of Regulation (EU) No 575/2013 or the central institution or an affiliate of a network or cooperative group as referred to in Article 10 of that Regulation;

(c)

the lower outflow rate does not fall below the inflow rate applied by the counterparty;

(d)

the credit institution and the counterparty are established in the same Member State.

(a)

the liquidity provider and receiver shall present a low liquidity risk profile;

(b)

there are legally binding agreements and commitments between the group entities regarding the undrawn credit or liquidity line;

(c)

the liquidity risk profile of the liquidity receiver shall be taken into account adequately in the liquidity risk management of the liquidity provider,

(a)

the excess collateral the credit institution holds that can be contractually called at any times by the counterparty;

(b)

collateral that is due to be posted to a counterparty within 30 calendar days;

(c)

collateral that corresponds to assets that would qualify as liquid assets for the purposes of Title II that can be substituted for assets corresponding to assets that would not qualify as liquid assets for the purposes of Title II without the consent of the credit institution.

(a)

it may be reused or hypothecated by the credit institution;

(b)

it is held in the form of liquid assets, but is not recognised as part of the liquidity buffer; and

(c)

it does not consist in assets issued by the counterparty of the facility or one of its affiliated entities.

(a)

they do not qualify for the retail deposit exposure class;

(b)

they have been provided to clients that are not financial customers, including non-financial corporates, sovereigns, central banks, multilateral development banks and public sector entities;

(c)

they have not been provided for the purpose of replacing funding of the client in situations where the client is unable to obtain funding requirements in the financial markets.

(a)

40 % for credit and liquidity facilities extended to credit institutions and for credit facilities extended to other regulated financial institutions, including insurance undertakings and investment firms, CIUs or non-open ended investment scheme;

(b)

100 % for liquidity facilities that the credit institution has granted to SSPEs other than those referred to in paragraph 6 and for arrangements under which the institution is required to buy or swap assets from an SSPE;

(c)

100 % for credit and liquidity facilities to financial customers not referred to in points (a) and (b) and paragraphs 1 to 7.

(a)

monies due from central banks and financial customers. In relation to the latter, inflows from the following transactions in particular shall be regarded as subject to the 100 % inflow rate:

(b)

monies due from positions in major indexes of equity instruments, provided there is no double counting with liquid assets. Those monies shall include monies contractually due within 30 calendar days, such as cash dividends from such major indexes and cash due from such equity instruments sold but not yet settled, if they are not recognised as liquid assets in accordance with Title II;

(a)

monies due from non-financial customers shall be reduced for the purposes of principal payment by 50 % of their value or by the contractual commitments to those customers to extend funding, whichever is higher. For the purposes of this point, non-financial customers shall include corporates, sovereigns, multilateral development banks and public sector entities; By derogation credit institutions that have received a commitment referred to in Article 31(9) in order for them to disburse a promotional loan to a final recipient, or have received a similar commitment from a multilateral development bank or a public sector entity, may take an inflow into account up to the amount of the outflow they apply to the corresponding commitment to extend those promotional loans.

(b)

monies due from secured lending and capital market-driven transactions as defined in points (2) and (3) of Article 192 of Regulation (EU) No 575/2013 collateralised by liquid assets, shall not be taken into account up to the value of the liquid assets net of the haircuts applicable in accordance with Title II. Monies due for the remaining value or where they are collateralised by assets that do not qualify as liquid assets in accordance with Title II shall be taken into account in full. No inflow shall be allowed if the collateral is used to cover a short position according to Article 30(5);

(c)

monies due from contractual maturing margin loans made against non-liquid assets collateral may receive a 50 % inflow rate. Such inflows may only be considered if the credit institution is not using the collateral it originally received against the loans to cover any short positions;

(d)

monies due that the credit institution owing those monies treats in accordance with Article 27, with the exception of deposits at the central institution referred to in Article 27(3), shall be multiplied by a corresponding symmetrical inflow rate. Where the corresponding rate cannot be established, a 5 % inflow rate shall be applied;

(e)

collateral swaps that mature within 30 calendar days shall lead to an inflow for the excess liquidty value of the assets lent compared to the liquidity value of the assets borrowed;

(f)

if the collateral obtained through reverse repo, securities borrowing, or collateral swaps, which matures within the 30-day horizon, is rehypothecated and used to cover short positions that can be extended beyond 30 days, a credit institution shall assume that such reverse repo or securities borrowing arrangements will be rolled-over and will not give rise to any cash inflows reflecting its need to continue to cover the short position or to re-purchase the relevant securities. Short positions include both instances where in a matched book the credit institution sold short a security outright as part of a trading or hedging strategy and instances where the credit institution is short a security in the matched repo book and has borrowed a security for a given period and lent the security out for a longer period;

(g)

any undrawn credit or liquidity facilities and any other commitments received from entities other than central banks and those referred to in Article 34 shall not be taken into account. Undrawn committed liquidity facilities from the central bank which are recognised as liquid assets in accordance with Article 14 shall not be taken into account as an inflow;

(h)

monies due from securities issued by the credit institution itself or by a related entity shall be taken into account on a net basis with an inflow rate applied on the basis of the inflow rate applicable to the underlying asset pursuant to this Article;

(i)

assets with an undefined contractual end date shall be taken into account with a 20 % inflow rate, provided that the contract allows the credit institution to withdraw or to request payment within 30 days.

(a)

inflows where the provider is a parent or a subsidiary of the credit institution or another subsidiary of the same parent or linked to the credit institution by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC;

(b)

inflows from deposits placed with other credit institutions within a group of entities qualifying for the treatment set out in Article 113(6) or (7) of Regulation (EU) No 575/2013;

(c)

inflows referred to in Article 26, including inflows from loans related to mortgage lending, or promotional loans referred to in Article 31(9) or from a multilateral development bank or a public sector entity that the credit institution has passed-through.

(a)

financing for the acquisition of motor vehicles;

(b)

consumer credit as defined in Directive 2008/48/EC of the European Parliament and of the Council.

(a)

the business activities exhibit a low liquidity risk profile, taking into account the following factors:

(b)

at individual level, the ratio of their main activities as referred to in paragraph 3 or 4 exceeds 80 % of the total balance sheet;

(c)

the derogations are disclosed in annual reports.

(a)

there are reasons to expect a higher inflow even under a combined market and idiosyncratic stress of the provider;

(b)

the counterparty is the parent or a subsidiary of the credit institution or another subsidiary of the same parent or linked to the credit institution by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC or a member of the same institutional protection scheme referred to in Article 113(7) of Regulation (EU) No 575/2013 or the central institution or an affiliate of a network or cooperative group as referred to in Article 10 of Regulation (EU) No 575/2013;

(c)

where the inflow rate exceeds 40 %, a corresponding symmetric outflow rate is applied by the counterparty by way of derogation from Article 31;

(d)

the credit institution and the counterparty are established in the same Member State.

(a)

the liquidity provider and receiver present a low liquidity risk profile;

(b)

there are legally binding agreements and commitments between group entities regarding the credit or liquidity line;

(c)

the liquidity risk profile of the liquidity receiver has been adequately taken into account in the liquidity risk management of the liquidity provider.

(a)

was granted or committed to for a maximum amount prior to 30 June 2014;

(b)

is a direct, explicit, irrevocable and unconditional guarantee and covers the failure to pay principal and interest when due.

(a)

in Ireland, the National Asset Management Agency (NAMA);

(b)

in Spain, the Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, S.A. (SAREB);

(c)

in Slovenia, the Bank Asset Management Company as established under the Measures of the Republic of Slovenia to Strengthen the Stability of Banks Act (MSSBA);

(a)

60 % of the liquidity coverage requirement as from 1 October 2015;

(b)

70 % as from1 January 2016;

(c)

80 % as from 1 January 2017;

(d)

100 % as from 1 January 2018.

17.1.2015   

EN

Official Journal of the European Union

L 11/37

(1)

The leverage ratio calculated in accordance with Article 429 of Regulation (EU) No 575/2013 is to be disclosed by institutions from 1 January 2015 onwards and before that date, the Commission is empowered to adopt a delegated act amending the exposure and capital measure for calculating the leverage ratio to correct any shortcomings detected on the basis of reporting by institutions.

(2)

Differences have been observed in the reported leverage ratios referred to in Article 429(2) of Regulation (EU) No 575/2013 due to diverging interpretation by institutions of the netting of collateral in securities financing and repurchase transactions. These differences in interpretation and reporting have become manifest following the analytical report published on 4 March 2014 by the European Banking Authority (EBA).

(3)

Given that the provisions of Regulation (EU) No 575/2013 mirrored those of the Basel standards, the solutions found to the shortcomings of the Basel rules are also fit for the purpose of addressing the corresponding shortcomings of the relevant provisions of that Regulation.

(4)

The Basel Committee adopted on 14 January 2014 a revised rules text on the leverage ratio with in particular additional measurement and netting arrangements for repurchase transactions and securities financing transactions. Alignment of the provisions of Regulation (EU) No 575/2013 concerning the calculation of the leverage ratio with the internationally agreed rules should address diverging interpretations by institutions for the netting of collateral of securities financing and repurchase transactions and should also enhance international comparability as well as create a level playing field for institutions that are established in the Union and operate internationally.

(5)

Clearing via central counter parties under the principal model commonly used in the Union creates a double counting of leverage in the exposure measure of an institution acting as a clearing member.

(6)

Clearing of securities financing transactions, especially repurchase transactions, through qualifying central counterparties (QCCPs) can bring advantages such as multilateral netting and robust collateral management processes which enhance financial stability. Cash receivables and payables for repurchase and reverse repurchase transactions via the same QCCP should therefore be allowed to be netted.

(7)

Repurchase transactions that can be terminated at any day subject to an agreed recall notice period should be considered equivalent to having an explicit maturity equal to the recall notice period and the ‘same explicit final settlement date’ should be deemed to be met so that such transactions are eligible for the netting of cash receivables and payables of repurchase transactions and reverse repurchase transactions with the same counterparty.

(8)

The revised leverage ratio should lead to a more accurate measure of leverage and should serve as a proportionate constraint on the accumulation of leverage in institutions established in the Union.

(9)

Point in time reporting of the leverage ratio at the end of the quarterly reporting period rather than reporting on the basis of a three-month average better aligns the leverage ratio with solvency reporting.

(10)

Using gross notional amounts for written credit protection issued by an institution more appropriately reflects leverage as compared to using the mark to market method for those instruments.

(11)

The scope of consolidation for calculating the leverage ratio should be aligned with the regulatory scope of consolidation used for determining the risk weighted capital ratios.

(12)

The changes introduced by this Regulation should lead to better comparability of the leverage ratio disclosed by institutions and should help to avoid misleading market participants as to the real leverage of institutions. It is therefore necessary that this Regulation enters into force as soon as possible.

(13)

Regulation (EU) No 575/2013 should therefore be amended accordingly,

(1)

Article 429 is replaced by the following:

‘Article 429

Calculation of the leverage ratio

1.   Institutions shall calculate their leverage ratio in accordance with the methodology set out in paragraphs 2 to 13.

2.   The leverage ratio shall be calculated as an institution's capital measure divided by that institution's total exposure measure and shall be expressed as a percentage.

Institutions shall calculate the leverage ratio at the reporting reference date.

3.   For the purposes of paragraph 2, the capital measure shall be the Tier 1 capital.

4.   The total exposure measure shall be the sum of the exposure values of:

5.   Institutions shall determine the exposure value of assets, excluding contracts listed in Annex II and credit derivatives, in accordance with the following principles:

6.   Institutions may deduct from the exposure measure set out in paragraph 4 of this Article the amounts deducted from Common equity Tier 1 capital in accordance with Article 36(1)(d).

7.   Competent authorities may permit an institution not to include in the exposure measure exposures that can benefit from the treatment laid down in Article 113(6). Competent authorities may grant that permission only where all the conditions set out in points (a) to (e) of Article 113(6) are met and where they have given the approval laid down in Article 113(6).

8.   By way of derogation from point (d) of paragraph 5, institutions may determine the exposure value of cash receivables and cash payables of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions with the same counterparty on a net basis only if all the following conditions are met:

For the purposes of point (c) of the first subparagraph, a settlement mechanism results in the functional equivalent of net settlement if, on the settlement date, the net result of the cash flows of the transactions under that mechanism is equal to the single net amount under net settlement.

9.   Institutions shall determine the exposure value of contracts listed in Annex II and of credit derivatives including those that are off-balance sheet, in accordance with Article 429a.

10.   Institutions shall determine the exposure value of off-balance-sheet items, excluding contracts listed in Annex II, credit derivatives, repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions, in accordance with Article 111(1). However, institutions shall not reduce the nominal value of those items by specific credit risk adjustments.

In accordance with Article 166(9), where a commitment refers to the extension of another commitment, the lower of the two conversion factors associated with the individual commitment shall be used. The exposure value of low risk off- balance sheet items referred to in Article 111(1)(d) shall be subject to a floor equal to 10 % of their nominal value.

11.   An institution that is a clearing member of a QCCP may exclude from the calculation of the exposure measure trade exposures of the following items, provided that those trade exposures are cleared with that QCCP and meet, at the same time, the conditions laid down in Article 306(1)(c):

12.   Where an institution that is a clearing member of a QCCP guarantees to the QCCP the performance of a client that enters directly into derivative transactions with the QCCP, it shall include in the exposure measure the exposure resulting from the guarantee as a derivative exposure to the client in accordance with Article 429a.

13.   Where national generally accepted accounting principles recognise fiduciary assets on balance sheet, in accordance with Article 10 of Directive 86/635/EEC, those assets may be excluded from the leverage ratio total exposure measure provided that they meet the criteria for non-recognition set out in International Accounting Standard (IAS) 39, as applicable under Regulation (EC) No 1606/2002, and, where applicable, the criteria for non-consolidation set out in International Financial Reporting Standard (IFRS) 10, as applicable under Regulation (EC) No 1606/2002.

14.   Competent authorities may permit an institution to exclude from the exposure measure exposures that meet all of the following conditions:

(2)

The following Articles 429a and 429b are inserted:

‘Article 429a

Exposure value of derivatives

1.   Institutions shall determine the exposure value of contracts listed in Annex II and of credit derivatives, including those that are off-balance sheet, in accordance with the method set out in Article 274. Institutions shall apply Article 299(2)(a) for the determination of the potential future credit exposure for credit derivatives.

When determining the potential future credit exposure of credit derivatives, institutions shall apply the principles laid down in Article 299(2)(a) to all their credit derivatives, not only those assigned to the trading book.

In determining the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295. Cross-product netting shall not apply. However, institutions may net within the product category referred to in point (25)(c) of Article 272 and credit derivatives when they are subject to a contractual cross-product netting agreement referred to in Article 295(c).

2.   Where the provision of collateral related to derivatives contracts reduces the amount of assets under the applicable accounting framework, institutions shall reverse that reduction.

3.   For the purposes of paragraph 1, institutions may deduct variation margin received in cash from the counterparty from the current replacement cost portion of the exposure value in so far as under the applicable accounting framework the variation margin has not already been recognised as a reduction of the exposure value and when all the following conditions are met:

For the purposes of point (c) of the first subparagraph, where the derivative contract is subject to a qualifying master netting agreement, the currency of settlement means any currency of settlement specified in the derivative contract, the governing qualifying master netting agreement or the credit support annex to the qualifying master netting agreement.

Where under the applicable accounting framework an institution recognises the variation margin paid in cash to the counterparty as a receivable asset, it may exclude that asset from the exposure measure provided that the conditions in points (a) to (e) are met.

4.   For the purposes of paragraph 3 the following shall apply:

5.   In addition to the treatment laid down in paragraph 1, for written credit derivatives institutions shall include in the exposure value the effective notional amounts referenced by the written credit derivatives reduced by any negative fair value changes that have been incorporated in Tier 1 capital with respect to the written credit derivative. The resulting exposure value may be further reduced by the effective notional amount of a purchased credit derivative on the same reference name provided that all the following conditions are met:

Where the notional amount of a written credit derivative is not reduced by the notional amount of a purchased credit derivative, institutions may deduct the individual potential future exposure of that written credit derivative from the total potential future exposure determined according to paragraph 1 of this Article in conjunction with Article 274(2) or Article 299(2)(a) as applicable. In case that the potential future credit exposure shall be determined in conjunction with Article 298(1)(c)(ii), PCEgross may be reduced by the individual potential future exposure of written credit derivatives with no adjustment made to the NGR.

6.   Institutions shall not reduce the written credit derivative effective notional amount where they buy credit protection through a total return swap and record the net payments received as net income, but do not record any offsetting deterioration in the value of the written credit derivative reflected in Tier 1 capital.

7.   In case of purchased credit derivatives on a pool of reference entities, institutions may recognise a reduction according to paragraph 5 on written credit derivatives on individual reference names only if the protection purchased is economically equivalent to buying protection separately on each of the individual names in the pool. If an institution purchases a credit derivative on a pool of reference names, it may only recognise a reduction on a pool of written credit derivatives when the pool of reference entities and the level of subordination in both transactions are identical.

8.   By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Article 275 to determine the exposure value of contracts listed in points 1 and 2 of Annex II only where they also use that method for determining the exposure value of those contracts for the purposes of meeting the own funds requirements set out in Article 92.

When institutions apply the method set out in Article 275, they shall not reduce the exposure measure by the amount of variation margin received in cash.

Article 429b

Counterparty credit risk add-on for repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions

1.   In addition to the exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet in accordance with Article 429(5), institutions shall include in the exposure measure an add-on for counterparty credit risk determined in accordance to paragraph 2 or 3 of this Article, as applicable.

2.   For the purposes of paragraph 1, for transactions with a counterparty which are not subject to a master netting agreement that meets the conditions laid down in Article 206 the add-on (Ei*)shall be determined on a transaction-by-transaction basis in accordance with the following formula:

where:

3.   For the purposes of paragraph 1, for transactions with a counterparty that are subject to a master netting agreement that meets the conditions laid down in Article 206, the add-on for those transactions (Ei*) shall be determined on an agreement-by-agreement basis in accordance with the following formula:

where:

4.   By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Article 222, subject to a 20 % floor for the applicable risk weight, to determine the add on for repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet. Institutions may use this method only where they also use it for determining the exposure value of those transactions for the purpose of meeting the own funds requirements as set out in Article 92.

5.   Where sale accounting is achieved for a repurchase transaction under its applicable accounting framework, the institution shall reverse all sales-related accounting entries.

6.   Where an institution acts as an agent between two parties in repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance sheet, the following apply:

17.1.2015   

EN

Official Journal of the European Union

L 11/44

(1)

Directive 2014/59/EU requires Member States to establish resolution financing arrangements for the purpose of ensuring the effective application by the resolution authority of the resolution tools and powers. Those resolution financing arrangements should have adequate financial resources to allow for an effective functioning of the resolution framework and are therefore empowered to raise ex-ante contributions from the institutions authorised in their territory including Union branches (institutions).

(2)

Member States are obliged to raise ex ante contributions to resolution financing arrangements not only from institutions, but in accordance with Article 103(1) of that Directive also from Union branches. Union branches are also covered by the empowerments of the Commission to adopt delegated acts pursuant to Article 103(7) and (8) of that Directive. However, in consideration of the fact, by virtue of Article 47 of Directive 2013/36/EU of the European Parliament and of the Council (2), that the prudential requirements and supervisory treatment of Union branches fall under the responsibility of Member States, many of the risk adjustment metrics set out in this Delegated Regulation are not appropriate to apply directly to the Union branches. Therefore, while Union branches do not fall within the scope of this Regulation, they may be subject to a specific regime developed by the Commission in a future Delegated Act.

(3)

Pursuant to Articles 6, 15, 16, 95 and 96 of Regulation (EU) No 575/2013 of the European Parliament and of the Council (3), certain investment firms which are authorized to carry out only limited services and activities are not subject or may be exempted from certain capital and liquidity requirements. Consequently, many of the risk adjustment metrics that should be set out would not apply to them. Whilst Member States are subject to the obligation to raise ex ante contributions from these investment firms in accordance with Article 103(1) of Directive 2014/59/EU, it is appropriate to leave to Member States the power of establishing the risk adjustment in order not to disproportionately burden these firms. Those investment firms should therefore not fall within the scope of this Regulation.

(4)

In accordance with Article 102(1) of Directive 2014/59/EU, Member States should ensure that, within a period starting from the entry into force of the Directive until 31 December 2024, the available financial means of their financing arrangements reach at least 1 % of the amount of covered deposits of all the institutions authorised in their territory. During that period of time, contributions to the financing arrangements should be spread out in time as evenly as possible until the target level is reached, by taking into account of the phase of the business cycle and the impact that pro-cyclical contributions may have on the financial position of contributing institutions.

(5)

Article 103(1) of Directive 2014/59/EU requires that contributions be raised at least annually in order to reach the target level specified in Article 102 of that Directive. Pursuant to Article 103(2) of Directive 2014/59/EU, annual contribution should reflect an institution's size, as the contribution should be based on a fixed amount determined on the basis of that institution's liabilities (basic annual contribution); second, it reflects the risk level of the relevant activities of an institution as the basic annual contribution should be adjusted in proportion to the risk profile of that institution (additional risk adjustment). The size of an institution represents a first indicator of the risk posed by an institution. The larger an institution is, the more likely it is that, in case of distress, the resolution authority would consider it in the public interest to resolve that institution and to make use of the resolution financing arrangement to ensure an effective application of the resolution tools.

(6)

To clarify how resolution authorities should adjust the contributions in proportion to the risk profile of institutions it is necessary to specify the risk pillars and indicators which should be used to determine the risk profile of institutions, the mechanism for applying the risk adjustment to the basic annual contribution, and the basic annual contribution, as the starting point for the risk adjustment. Those elements which would supplement the risk criteria provided for in Article 103(7) of Directive 2014/59/EU should be established in a way to preserve a level playing field among the Member States and a strong internal market by avoiding discrepancies between Member States' approaches to the calculation of contributions to their respective resolution financing arrangements. This allows contributions paid by institutions to the resolution financing arrangements to be comparable and predictable across types of banks, which is an important element of a level playing field in the internal market.

(7)

Article 5(1) of Regulation (EU) No 806/2014 of the European Parliament and of the Council (4) provides that the Single Resolution Board (the Board) established by Article 42(1) of that Regulation is considered, for the application of that Regulation and of Directive 2014/59/EU, as the relevant national resolution authority where it performs tasks and exercises powers which, pursuant to that Directive are to be performed or exercised by the national resolution authority. Considering that Article 70(7) of Regulation (EU) No 806/2014 empowers the Board to calculate the contributions of institutions to the Single Resolution Fund which would replace the financing arrangements of the participant Member States in the Single Resolution Mechanism as of 1 January 2016 by applying this Regulation based on Article 103(7) of Directive 2014/59/EU, the notion of resolution authority under this Regulation should also include the Board.

(8)

The calculation of contributions at individual level would lead, in case of groups, to the double counting of certain liabilities when determining the basic annual contribution of the different group entities, since the liabilities related to the agreements that the entities of the same group conclude with each other would be, part of the total liabilities to be considered to determine the basic annual contribution of each entity of the group. Therefore, the determination of the basic annual contribution should be further specified in case of groups to reflect the interconnectedness of the group entities and avoid double counting intragroup exposures. In order to ensure a level playing field between entities which are part of a group and institutions which are members of the same IPS or are permanently affiliated to the same central body, the same treatment should apply to the latters.

(9)

For the purpose of calculating the basic annual contribution of a group entity, the total liabilities to be considered should not include the liabilities arisen from any contract which that group entity concluded with any other entity which is part of the same group. However, such exclusion should only be possible where each group entity is established in the Union, is included in the same consolidation on a full basis, is subject to an appropriate centralized risk evaluation, measurement and control procedures, and if there are no current or foreseen material practical or legal impediments to the prompt repayment of the relevant liabilities when due. This should prevent liabilities from being excluded from the basis of calculation of the contributions if there are no guarantees that intragroup lending exposures would be covered where the financial health of the group deteriorates. Moreover, to avoid that the exclusion of intragroup liabilities grants an advantage to group entities which benefit from this exemption, such exclusion should not allow the institutions concerned to benefit from the simplified contribution system granted to small institutions, where, following the exclusion of intragroup liabilities, an institution would qualify for the simplified system. In order to ensure a level playing field between entities which are part of a group and institutions which are members of the same IPS or are permanently affiliated to the same central body, the same treatment should apply to the latters.

(10)

By way of derogation from the rule that the calculation of contributions should be performed at individual level, in the case of a central body with credit institutions affiliated to it that are wholly or partially exempted from prudential requirements in national law in accordance with Article 10 of Regulation (EU) No 575/2013 of the European Parliament and of the Council, the rules on ex ante contributions should only apply to the central body and the affiliated credit institutions as a whole on a consolidated basis because the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts of these institutions.

(11)

The determination of the basic annual contribution should also be further specified in case of financial market infrastructures (FMIs). Some FMIs such as central counterparties (CCPs) or central securities depositories (CSDs) are also authorized as credit institutions. Notably some CSDs provide banking-type services which are ancillary to their activity as market infrastructures. Contrary to credit institutions, CSDs do not hold covered deposits but mostly intraday or overnight balances resulting from the settlement of the securities transactions they provide to financial institutions or central banks. Generally these do not result in cash balances which could be assimilated to funding raised in order to perform banking activities. As the banking-type services performed by FMIs are ancillary to their main activities of clearing or settlement for which those entities are subject to strict prudential requirements under Regulations (EU) No 648/2012 (5) and (EU) No 909/2014 (6) of the European Parliament and of the Council, as well as the relevant provisions under Regulation (EU) No 575/2013 and Directive 2013/36/EU, and as the business model of the FMIs does not entail risks comparable to those of a credit institution, only the liabilities related to the banking-type activities of those entities should be taken into account when determining the amount of their total liabilities for the purpose of calculating their basic annual contribution.

(12)

Accounting of derivatives is not harmonized in the Union with respect to individual accounts and therefore this could have an implication in the amount of liabilities to be considered for the calculation of the contributions of each bank. The leverage ratio methodology referred to in Article 429(6) and (7) of Regulation (EU) No 575/2013 applies to all banks and ensures that the same derivative contract, and in particular the netting between derivative contracts, will be considered in the same manner irrespective of the accounting framework to which that bank is subject. Therefore, to ensure a harmonised treatment of derivatives in the determination of the basic annual contribution allowing for the comparability of their valuation between institutions and for a level playing field across the Union, derivatives should be valued in accordance with Article 429(6) and (7) of Regulation (EU) No 575/2013. However, to ensure the predictability of the valuation of derivatives under Regulation (EU) No 575/2013, it should be foreseen that such valuation may not lead to a value which is less than 75 % of the value of the derivatives concerned under the relevant accounting framework.

(13)

Some credit institutions are promotional banks whose purpose is to advance the public policy objectives of a Member State's central or regional government, or local authority predominantly through the provision of promotional loans on a non-competitive, not for profit basis. The loans that such institutions grant are directly or indirectly partially guaranteed by the central or regional government or the local authority. Promotional loans are granted on a non-competitive, not for profit basis in order to promote public policy objectives of the Union or a Member State's central or regional government. The promotional loans are sometimes extended via another institution as intermediary (pass through loans). In such cases, the intermediary credit institution receives promotional loans from a multilateral development bank or a public sector entity and extends them to other credit institutions which would provide them to the final clients. As the intermediary credit institutions pass through liquidity of these loans from the originating promotional bank towards a lending institution or another intermediary institution, such liabilities should not be included in the total liabilities to be considered for the purpose of calculating the basic annual contribution.

(14)

Article 103(1) of Directive 2014/59/EU requires all institutions to contribute to the resolution financing arrangements. However, a proportionate and fair balance needs to be found between the obligation of any institution to contribute to a resolution financing arrangement, and its size, risk profile, the scope and complexity of its activities, its interconnectedness to the other institutions or to the financial system in general, the impact of its failure on the financial markets, on other institutions, on funding conditions, or on the wider economy, and therefore the probability that an institution enters into resolution and makes use of the financing arrangement. Such elements are taken into account by the resolution authorities, pursuant to Article 4 of Directive 2014/59/EU, when deciding whether certain institutions should benefit from simplified obligations as regards the requirements to prepare recovery and resolution plans. Also, the administrative burden deriving for certain institutions and resolution authorities from the calculation of the annual contributions should be taken into account when assessing the right balance between complying with the requirements set out in Directive 2014/59/EU and the specificities of the various institutions subject to that Directive.

(15)

Small institutions do not generally have a high risk profile, are often less systemically risky compared to large institutions, and, in many cases, the impact of their failure on the wider economy is lower than that of large institutions. At the same time, the potential impact of the failure of small institutions on the financial stability cannot be ruled out as even small institutions can create systemic risk because of their role in the wider banking system, the cumulative effects of their networks, or the contagion effect that they might create through the loss of confidence in the banking system.

(16)

Considering that in most cases small institutions do not pose systemic risk and are less likely to be placed under resolution, which consequently decreases the likelihood that they benefit from the resolution financing arrangements, compared to large institutions, the methodology for calculating their annual contributions to the resolution financing arrangements should be simplified. The annual contributions of small institutions should consist of a lump-sum based only on their basic annual contribution, proportioned to their size. Such a methodology should allow for a proportionate system of annual contributions as, in determining the annual contribution of each institution, the resolution authority has to comply with an annual target level of the financing arrangement. Therefore, a lump-sum reflects the fact that, in many cases, small institutions are less risky and allows for a wider adjustment of the contribution of larger institutions, which are generally more systemic, in proportion to their risk profile.

(17)

To determine which institutions are considered small, a double threshold should be used whereby the first threshold based on total liabilities (excluding own funds) less covered deposits should be equal or less to EUR 300 million, and the second threshold based on the total assets should not exceed EUR 1 billion. The latter should prevent larger institutions which meet the first threshold related to the amount of liabilities from benefitting from the simplified system.

(18)

A distinction should be made within the category of small institutions as some are very small, while others are close to the maximum thresholds allowing them to benefit from the simplified system. Under a single lump-sum system, the annual contributions of very small institutions would be disproportionately higher than those of the small institutions which are close to reaching the maximum thresholds. At the same time, it should be avoided that the simplified system leads to a disproportionate difference in terms of annual contributions between the biggest among small institutions and the institutions which do not qualify for the simplified system as they are just above the thresholds. To avoid such unwanted effects it is therefore appropriate to foresee a system of several categories of small institutions whose annual contributions should consist of different lump sum amounts. This should allow for a progression of contributions within the simplified system, and between the highest lump sum and the lowest contribution pursuant to the method whereby the basic annual contribution is adjusted according to the risk profile of the institution.

(19)

Where the resolution authority determines that a small institution has a particularly high risk profile, the resolution authority should have the ability to decide that the institution concerned should no longer benefit from the simplified system, but its contribution should instead be calculated pursuant to the method whereby the basic annual contribution is adjusted according to risk factors other than the institution's size.

(20)

Institutions referred to in Article 45(3) of Directive 2014/59/EU will not be recapitalized through the use of the resolution financing arrangements in accordance with Articles 44 and 101 of Directive 2014/59/EU because they will be wound-up through national insolvency procedures, or other types of procedure implemented in accordance with Article 38, 40 or 42 of Directive 2014/59/EU and will cease their activities. These procedures ensure that creditors of those institutions, including holders of covered bonds where relevant, will bear the losses in a way that meets the resolution objectives. Therefore, their contributions to the resolution financing arrangements should reflect these specificities. The resolution financing arrangements could, however, be used for the other purposes referred to in Article 101 of Directive 2014/59/EU. In case any such institution uses the resolution financing arrangement for any of such purposes, the resolution authority should be able to compare the risk profile of all other institutions covered by Article 45(3) of Directive 2014/59/EU with that of the institution which used the resolution financing arrangement and apply the methodology set out this Delegated Act to those institutions which present a risk profile similar or higher than that of the institutions which used the resolution financing arrangement. It is also appropriate to establish a list of elements that the resolution authority should take into account when carrying out the comparison of risk profiles.

(21)

In order to enable the resolution authorities of the Member States to have a harmonised interpretation of the criteria set out in Article 103(7) of Directive 2014/59/EU so that the determination of the risk indicator of institutions for the purpose of calculating the individual contributions to the resolution financing arrangements is carried out in a similar manner across the Union, a number of risk pillars, and corresponding risk indicators for each of those risk pillars, should be provided for, to be taken into account by the resolution authorities when assessing the risk profile of institutions. To ensure consistency with the supervisory practices, the risk indicators should consist of current regulatory benchmarks already available or in the course of being established.

(22)

Where the relevant legislation provides for waivers that exempt institutions from setting some of the risk indicators at the institution's level, and provided, where applicable, that the competent authorities authorise the application of such waivers, the resolution authorities should assess the relevant indicators at consolidated level or sub-consolidated, as applicable, in order to be consistent with the supervisory practice and ensure that groups that make use of those waivers are not unduly penalized.

(23)

In order to enable the resolution authorities to have a consistent approach as to the importance of the risk pillars and indicators that they should take into account for the purpose of determining the risk profile of institutions, this Regulation should also determine the relative weight of each risk pillar and indicator. It is important, however, that resolution authorities be granted enough flexibility in assessing the risk profile of institutions by being able to modulate the application of risk pillars and indicators in accordance to the specificities of each institution. As this cannot be achieved exclusively by providing for a range for assessing the risk profile, but requires a certain degree of discretion in deciding upon the importance of certain risk indicators on a case by case basis, the weight of some risk indicators should only be indicative, or a range should be set out in their respect to allow the resolution authorities to decide upon the relevance of those indicators in a given case.

(24)

When determining the importance of the various indicators corresponding to a given pillar, aggregation within pillars should be done by means of an arithmetic weighted average of the individual indicators. As regards the calculation of final composite risk indicator corresponding to each institution, to avoid compensation effects between pillars whereby an institution performing moderately well under several pillars and very poorly under another would generally be given a middle score pursuant to an arithmetic average of the different pillars, such calculation should be based on the geometric weighted average of the individual pillars.

(25)

The range for assessing the degree of risk posed by an institution should be such to allow for a sufficient modulation of the risk profile of institutions according to the various risk pillars and indicators set out in this Regulation, while offering at the same time enough certainty and predictability as regards the annual amounts that institutions would have to contribute pursuant to Directive 2014/59/EU and this Regulation.

(26)

In order to ensure that contributions are effectively paid, it is necessary to specify the conditions and means of payment. In particular, for contributions which are not paid in cash but in irrevocable payment commitments in accordance with Article 103 of Directive 2014/59/EU, it is necessary to specify the share of irrevocable payment commitments that each institution can use and the kind of collateral which is accepted to back these irrevocable payment commitments, so as to allow the resolution authority to ensure the actual payment when executing the irrevocable payment commitment where the resolution authority encounters difficulties in executing the irrevocable payment commitment. In order to ensure that the annual contributions are effectively paid, it is necessary to provide for the specific power of resolution authorities to impose administrative penalties and other administrative measures on institutions which breach the requirements set out in this Regulation for the calculation and adjustment of the contributions such non-compliance with the obligation to provide the information requested by the resolution authority. The resolution authority should also have the power to impose a daily penalty to an institution where the institution concerned only partially pays the annual contribution which is due, or where it does not pay it, or where that institution does not comply with the requirements set out in the notification made by the resolution authority. In addition, it is necessary to provide for specific obligations of information sharing between competent authorities and resolution authorities.

(27)

In order to ensure that the risk adjustment continues to reflect developments in the banking sector and therefore meets the requirements of Directive 2014/59/EU on an ongoing basis, based on the experience gained with its application the Commission will review the risk adjustment for the calculation of the annual contributions and, in particular, the appropriateness of the risk adjustment multiplier set out in this Regulation and the need for a possible increase of the upper limit the risk adjustment multiplier before 1 June 2016.

(28)

Since according to Article 130(1) of Directive 2014/59/EU, the obligation of Member States to raise annual contributions from institutions authorised on their territory applies from 1 January 2015, this Regulation should also apply from 1 January 2015,

(a)

the methodology for the calculation and for the adjustment to the risk profile of institutions, of the contributions to be paid by institutions to resolution financing arrangements;

(b)

the obligations of institutions as regards the information to provide for the purposes of the calculation of the contributions and as regards the payment of the contributions to resolution financing arrangements;

(c)

the measures to ensure the verification by the resolution authorities that the contributions have been paid correctly.

(1)

‘institutions’ means credit institutions, as defined in point (2) of Article 2(1) of Directive 2014/59/EU, or investment firms as defined in point (2) of this Article, as well as a central body and all credit institutions permanently affiliated to the central body as referred to in Article 10 of Regulation (EU) No 575/2013 as a whole on a consolidated basis, where the conditions provided for in Article 2(1) are met;

(2)

‘investment firms’ means investment firms as defined in point (3) of Article 2(1) of Directive 2014/59/EU, excluding investment firms which fall within the definition of Article 96(1)(a) or (b) of Regulation (EU) No 575/2013 or investment firms which carry out activity 8 of Annex I Section A of Directive 2004/39/EC of the European Parliament and of the Council (8) but which do not carry out activities 3 or 6 of Annex I Section A of that Directive;

(3)

‘annual target level’ means the total amount of annual contributions determined for each contribution period by the resolution authority to reach the target level referred to in Article 102(1) of Directive 2014/59/EU;

(4)

‘financing arrangement’ means an arrangement for the purpose of ensuring the effective application by the resolution authority of the resolution tools and powers as referred to in Article 100(1) of Directive 2014/59/EU;

(5)

‘annual contribution’ means the amount referred to in Article 103 of Directive 2014/59/EU raised by the resolution authority for the national financing arrangement during the contribution period from each of the institutions referred to in Article 2 of this Regulation;

(6)

‘contribution period’ means a calendar year;

(7)

‘resolution authority’ means the authority referred to in point (18) of Article 2(1) of Directive 2014/59/EU, or any other relevant authority appointed by the Member States for the purposes of Article 100(2) and (6) of Directive 2014/59/EU;

(8)

‘competent authority’ means a competent authority as defined in Article 4(1)(40) of Regulation (EU) No 575/2013;

(9)

‘deposit guarantee schemes’ (DGS) means schemes referred to in point (a), (b), or (c) of Article 1(2) of Directive 2014/49/EU;

(10)

‘covered deposits’ means the deposits referred to in Article 6(1) of Directive 2014/49/EU, excluding temporary high balances as defined in Article 6(2) of that Directive;

(11)

‘total liabilities’ means total liabilities as defined in Section 3 of Council Directive 86/635/EEC (9), or as defined in accordance with the International Financial Reporting Standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council (10);

(12)

‘total assets’ means total assets as defined in Section 3 of Directive 86/635/EEC, or defined in accordance with the International Financial Reporting Standards referred to in Regulation (EC) No 1606/2002;

(13)

‘Total Risk Exposure’ (TRE) means the total risk exposure amount as defined in Article 92(3) of Regulation (EU) No 575/2013;

(14)

‘Common Equity Tier 1 Capital Ratio’ means the ratio as referred to in Article 92(2)(a) of Regulation (EU) No 575/2013;

(15)

‘MREL’ means the minimum requirement for own funds and eligible liabilities as defined in Article 45(1) of Directive 2014/59/EU;

(16)

‘own funds’ means own funds as defined in point (118) of Article 4(1) of Regulation (EU) No 575/2013;

(17)

‘eligible liabilities’ means liabilities and capital instruments as defined in point (71) of Article 2(1) of Directive 2014/59/EU;

(18)

‘Leverage Ratio’ means leverage ratio as defined in Article 429 of Regulation (EU) No 575/2013;

(19)

‘Liquidity Coverage Ratio’ (LCR) means a liquidity coverage ratio as defined in Article 412 of Regulation (EU) No 575/2013 and further specified in Commission Delegated Regulation (EU) 2015/61 (11);

(20)

‘Net Stable Funding Ratio’ (NSFR) means a net stable funding ratio as reported in accordance with Article 415 of Regulation (EU) No 575/2013;

(21)

‘central counterparty’ (CCP) means a legal person as defined in Article 2(1) of Regulation (EU) No 648/2012;

(22)

‘derivatives’ means derivatives according to Annex II of Regulation (EU) No 575/2013;

(23)

‘central securities depository’ (CSD) means a legal person as defined in point (1) of Article 2(1) and in Article 54 of Regulation (EU) No 909/2014 of the European Parliament and of the Council (12);

(24)

‘settlement’ means the completion of a securities transaction as defined in point (2) of Article 2(1) of Regulation (EU) No 909/2014;

(25)

‘clearing’ means the process of establishing positions as defined in Article 2(3) of Regulation (EU) No 648/2012;

(26)

‘financial market infrastructure’ means, for the purpose of this Regulation, a CCP as referred to in point 21 of this Article or a CSD as referred to in point 23 of this Article that are authorised as institutions in accordance with Article 8 of Directive 2013/36/EU;

(27)

‘promotional bank’ means any undertaking or entity set up by a Member State, central or regional government, which grants promotional loans on a non-competitive, not for profit basis in order to promote that government's public policy objectives, provided that that government has an obligation to protect the economic basis of the undertaking or entity and maintain its viability throughout its lifetime, or that at least 90 % of its original funding or the promotional loan it grants is directly or indirectly guaranteed by the Member State's central or regional government;

(28)

‘promotional loan’ means a loan granted by a promotional bank or through an intermediate bank on a non-competitive, non for profit basis, in order to promote the public policy objectives of central or regional governments in a Member State;

(29)

‘intermediary institution’ means a credit institution which intermediates promotional loans provided that it does not give them as credit to a final customer.

(a)

the intragroup liabilities arising from transactions entered into by an institution with an institution which is part of the same group, provided that all the following conditions are met:

(b)

the liabilities created by an institution, which is member of an IPS as referred to in point (8) of Article 2(1) of Directive 2014/59/EU and which has been allowed by the competent authority to apply Article 113(7) of Regulation (EU) No 575/2013, through an agreement entered into with another institution which is member of the same IPS;

(c)

in the case of a central counterparty established in a Member State having availed itself of the option in Article 14(5) of Regulation (EU) No 648/2012, liabilities related to clearing activities as defined in Article 2(3) of that Regulation, including those arising from any measures the central counterparty takes to meet margin requirements, to set up a default fund and to maintain sufficient pre-funded financial resources to cover potential losses as part of the default waterfall in accordance with that Regulation, as well as to invest its financial resources in accordance with Article 47 of that Regulation;

(d)

in the case of a central securities depository, the liabilities related to the activities of a central securities depository, including liabilities to participants or service providers of the central securities depository with a maturity of less than seven days arising from activities for which it has obtained an authorisation to provide banking-type ancillary services in accordance with Title IV of Regulation (EU) No 909/2014, but excluding other liabilities arising from such banking-type activities;

(e)

in the case of investment firms, the liabilities that arise by virtue of holding client assets or client money including client assets or client money held on behalf of UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council (13) or of AIFs as defined in point (a) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council (14), provided that such a client is protected under the applicable insolvency law;

(f)

in case of institutions operating promotional loans, the liabilities of the intermediary institution towards the originating or another promotional bank or another intermediary institution and the liabilities of the original promotional bank towards its funding parties in so far as the amount of these liabilities is matched by the promotional loans of that institution.

(a)

Risk exposure;

(b)

Stability and variety of sources of funding;

(c)

Importance of an institution to the stability of the financial system or economy;

(d)

Additional risk indicators to be determined by the resolution authority.

(a)

Own funds and eligible liabilities held by the institution in excess of MREL;

(b)

Leverage Ratio;

(c)

Common Equity Tier 1 Capital Ratio;

(d)

Total Risk Exposure divided by Total Assets.

(a)

Net Stable Funding Ratio;

(b)

LCR.

(a)

Trading activities, off-balance sheet exposures, derivatives, complexity and resolvability;

(b)

Membership in an Institutional Protection Scheme;

(c)

Extent of previous extraordinary public financial support.

(a)

The increase in the risk profile of the institution due to:

(b)

The decrease of the risk profile of the institution due to:

(a)

whether the amount of funds which are available without delay for both recapitalisation and liquidity funding purposes in order to support the affected institution in case of problems is sufficiently large to allow for a credible and effective support of that institution;

(b)

the degree of legal or contractual certainty that the funds referred to in point (a) will be fully utilized before any extraordinary public support may be requested.

(a)

any institution that is part of a group that has been put under restructuring after receiving any State or equivalent funds such as from a resolution financing arrangement, and is still within the restructuring or winding down period, except for the last 2 years of implementation of the restructuring plan;

(b)

any institution that is liquidated, until the end of the liquidation plan (to the extent that it is still liable to pay the contribution).

(a)

Risk exposure: 50 %;

(b)

Stability and variety of sources of funding: 20 %;

(c)

Importance of an institution to the stability of the financial system or economy: 10 %;

(d)

Additional risk indicators to be determined by the resolution authority: 20 %.

(a)

Own funds and eligible liabilities held by the institution in excess of MREL: 25 %;

(b)

Leverage Ratio: 25 %;

(c)

Common Equity Tier 1 Capital Ratio: 25 %;

(d)

Total Risk Exposure divided by Total Assets: 25 %.

(a)

Trading activities and off-balance sheet exposures, derivatives, complexity and resolvability: 45 %;

(b)

Membership in an Institutional Protection Scheme: 45 %;

(c)

Extent of previous extraordinary public financial support: 10 %.

(a)

the business model of an institution;

(b)

the information reported by that institution pursuant to Article 14;

(c)

the risk pillars and indicators referred to in Article 6;

(d)

the assessment of the competent authority as regards the risk profile of that institution.

(a)

the business model of that institution;

(b)

the information reported by that institution pursuant to Article 14;

(c)

the risk pillars and indicators referred to in Article 6;

(d)

the assessment of the competent authority as regards the risk profile of that institution.

(a)

electronically or by other comparable means of communication allowing for an acknowledgment of receipt;

(b)

by registered mail with a form of acknowledgment of receipt.

17.1.2015   

EN

Official Journal of the European Union

L 11/65

(1)

Annex I to Regulation (EC) No 881/2002 lists the persons, groups and entities covered by the freezing of funds and economic resources under that Regulation.

(2)

On 2 January 2015, the Sanctions Committee of the United Nations Security Council (UNSC) decided to remove two persons from its list of persons, groups and entities to whom the freezing of funds and economic resources should apply. Moreover, on 24 November, 12 and 30 December 2014, the Sanctions Committee of the UNSC decided to amend seven entries on its list.

(3)

Annex I to Regulation (EC) No 881/2002 should therefore be updated accordingly,

17.1.2015   

EN

Official Journal of the European Union

L 11/68

(1)

Implementing Regulation (EU) No 543/2011 lays down, pursuant to the outcome of the Uruguay Round multilateral trade negotiations, the criteria whereby the Commission fixes the standard values for imports from third countries, in respect of the products and periods stipulated in Annex XVI, Part A thereto.

(2)

The standard import value is calculated each working day, in accordance with Article 136(1) of Implementing Regulation (EU) No 543/2011, taking into account variable daily data. Therefore this Regulation should enter into force on the day of its publication in the Official Journal of the European Union,

17.1.2015   

EN

Official Journal of the European Union

L 11/70

(1)

Commission Regulation (EC) No 341/2007 (2) opened annual tariff quotas for imports of garlic.

(2)

The quantities covered by the applications for ‘A’ import licences lodged in the first seven calendar days of January 2015, for the subperiod from 1 March 2015 to 31 May 2015, for certain quotas, exceed those available. The extent to which ‘A’ import licences may be issued should therefore be determined by establishing the allocation coefficient to be applied to the quantities requested, calculated in accordance with Article 7(2) of Commission Regulation (EC) No 1301/2006 (3).

(3)

In order to ensure the efficient management of the measure, this Regulation should enter into force on the day of its publication in the Official Journal of the European Union,

17.1.2015   

EN

Official Journal of the European Union

L 11/72

(1)

Pursuant to Decision 2014/219/CFSP, the Political and Security Committee (PSC) is authorised, in accordance with Article 38 of the Treaty, to take the relevant decisions for the purpose of exercising political control and strategic direction of the EUCAP Sahel Mali mission, including the decision to appoint a Head of Mission.

(2)

On 26 May 2014, the PSC adopted Decision EUCAP Sahel Mali/1/2014 (2), appointing Mr Albrecht CONZE as Head of Mission of EUCAP Sahel Mali from 26 May 2014 to 14 January 2015.

(3)

The High Representative of the Union for Foreign Affairs and Security Policy has proposed to extend the mandate of Mr Albrecht CONZE as Head of Mission of EUCAP Sahel Mali from 15 January 2015 to 14 June 2015,