(1)

The application of a preferential liquidity outflow or inflow rate for cross-border undrawn credit or liquidity facilities within a group or an institutional protection scheme (IPS), as provided for in Articles 29 and 34 of Commission Delegated Regulation (EU) 2015/61 (2), is limited to those cases where the necessary safeguards are in place and only with the prior approval of the competent authorities. These safeguards are provided for in Articles 29(2) and 34(2) of Delegated Regulation (EU) 2015/61 in terms of additional objective criteria to be met in the context of these transactions. Those safeguards should be further specified so as to clearly define the conditions for their compliance.

(2)

It should be ensured that the application of such preferential rates does not endanger the liquidity soundness of the liquidity provider and that it effectively alleviates the compliance with the liquidity coverage ratio of the liquidity receiver. A low liquidity risk profile should be demonstrated by the credit institutions' compliance with the liquidity coverage ratio and any other liquidity-related supervisory requirements and measures applied pursuant to Title VII, Chapter 2, Sections III and IV of Directive 2013/36/EU of the European Parliament and of the Council (3), together with the competent authorities' assessment, according to the latest supervisory review and evaluation process, that the institution's liquidity position poses a low level of risk, as objective references of their liquidity positions.

(3)

The effectiveness of the liquidity support within a group or an IPS on a cross-border basis should be guaranteed by a sound contractual framework evidenced by a legal opinion approved by the credit institutions' management body. A minimum remaining maturity of the line should ensure that the commitment is not punctual for a specific transaction but durable over a minimum period of time.

(4)

It should be ensured that the liquidity provider can provide the liquidity receiver with the necessary liquidity support in a timely manner, even in times of stress. For these purposes, the liquidity provider should monitor the liquidity position of the liquidity receiver and any contingency funding plans of the liquidity provider and receiver should address the effects of applying a preferential outflow or inflow rate.

(5)

The conditions for compliance with the additional objective criteria set out in Article 29(2) and Article 34(2) of Delegated Regulation (EU) 2015/61 should be aimed at providing sufficient ground to expect a higher than normal cross-border liquidity flows within a group or an IPS in stress while not hampering the efficiency and effectiveness of a model where the liquidity is normally centrally managed. In certain specific cases of non-compliance with those conditions, namely where the liquidity provider or receiver does not meet or expects not to meet the liquidity coverage ratio or any liquidity related supervisory requirements or measures, or where the remaining maturity of the liquidity or credit line falls below the prescribed minimum or a notice of cancellation of the line is given, the relevant competent authorities should reassess whether the application of preferential liquidity outflow or inflow rates may be continued with the aim of avoiding the unintended consequences that an automatic suspension of the preferential treatment might cause in terms of procyclical and contagion effects.

(6)

The further specification of those additional objective criteria should not alter the responsibility of the credit institutions — as liquidity provider or liquidity receiver — to manage their liquidity risk on a prudent basis.

(7)

The further specification of those additional objective criteria should also be aimed at providing competent authorities with sufficient tools to determine the application of a preferential outflow or inflow rate.

(8)

This Regulation is based on the draft regulatory technical standards submitted by the European Banking Authority to the Commission.

(9)

The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits, in accordance with Article 10 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (4), and requested the opinion of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010,

(a)

the liquidity provider monitors and oversees the liquidity position of the receiver on a daily basis. In case of correspondent banking, the monitoring and the oversight of the liquidity position of the receiver may be limited to the balances of the vostro accounts of the liquidity receiver;

(b)

the effects of the preferential outflow or inflow rate are fully considered and integrated into the contingency funding plans of the liquidity provider and the liquidity receiver, which take into account potential impediments to the transfer of such liquidity and assess the time needed to implement such a transfer. For these purposes, the liquidity provider demonstrates to the relevant competent authorities that it can reasonably be expected to continue to provide the liquidity facility to the liquidity receiver even in times of stress, without having a material adverse impact on its own liquidity position. The contingency funding plan of the liquidity provider ensures that it does not rely on the liquidity needed to honour the committed credit or liquidity line of the liquidity receiver;

(c)

the contingency funding plan of the liquidity provider takes into account the preferential outflow or inflow rate in order to ensure its ability to provide the necessary liquidity when required.