EBA issues Opinion on measures to address macroprudential risk

13 December 2017

The European Banking Authority (EBA) published today an Opinion following the notification by the Central Bank of Cyprus (CBC) of its intention to apply stricter liquidity requirements in order to address an increase in macroprudential risk, based on Article 458 of the Capital Requirements Regulation (CRR).
 
In particular, the CBC notified the EBA of its intention to tighten some elements in the calculation of the liquidity coverage ratio (LCR), in the form of an add-on, by setting stricter inflow and outflow rates than those defined in the Commission Delegated Regulation (EU) 2015/61 on liquidity coverage requirement for credit Institutions. 
 
The objective of the measure is to ensure that from 1 January 2018 there is a gradual release of the excess liquidity stemming from the lower liquidity requirements envisaged by the fully phased-in LCR compared to the current liquidity requirements in force in Cyprus. 
 
In its Opinion, addressed to the Council, the European Commission and the CBC, the EBA acknowledges the changes in the intensity of macroprudential or systemic risks in the Cypriot economy as well as the potential threat to financial stability that could result from a sudden release of excess liquidity. The EBA welcomes the CBC's intention to closely monitor the gradual release of liquidity and the liquidity positions of Cypriot banks and to take any necessary actions in the future.