Regulatory Technical Standards on criteria for a preferential treatment in cross-border intragroup financial support under LCR

Status: Adopted and published in the Official Journal

The draft Regulatory Technical Standards (RTS) specify the additional objective criteria listed in the Delegated Act (Commission Delegated Regulation EU No 2015/61 of 10 October 2014), for the application of a preferential treatment in the calculation of the liquidity coverage requirement (LCR) for cross-border intragroup liquidity flows. The proposed draft RTS set out in more detail the additional criteria that institutions within a group or within an institutional protection scheme (IPS) need to meet in order to be able to apply higher inflows and/or lower outflows on liquidity and credit facilities on cross-border transactions. These criteria, as already specified in the LCR Delegated Act, aim at ensuring the effectiveness of the liquidity support.

EBA publishes RTS on preferential treatment in cross-border intragroup financial support

EBA publishes RTS on preferential treatment in cross-border intragroup financial support

27 July 2016

The European Banking Authority (EBA) issued its final draft Regulatory Technical Standards (RTS) on criteria for the application of a preferential treatment in cross-border intragroup credit or liquidity lines, or within an IPS. These RTS further specify the additional criteria listed in the in the context of the liquidity coverage ratio (LCR) Delegated Act for the application of the preferential treatment.
 
Under the new RTS, a low liquidity risk profile of the liquidity provider and receiver required in the LCR Delegated Act will be determined on the basis of its compliance with the LCR and the Pillar 2 requirements, as well as on the basis of the outcome of the latest supervisory review and evaluation process.
 
Credit institutions' management bodies will be required to submit a written and reasoned legal opinion certifying that the credit or liquidity line in the LCR Delegated Act is a committed line legally and practically available at any time.
 
The line is also subject to other requirements such as currency denomination or maturity date, so as to reinforce the appropriateness of the line for the application of the preferential treatment.
 
Regarding the requirement in the LCR Delegated Act to take into account the liquidity risk profile of the liquidity receiver in the liquidity risk management plans of the liquidity provider, the liquidity provider shall monitor and oversee the liquidity position of the receiver on a daily basis. The contingency funding plan of the liquidity provider shall ensure that from this monitoring the liquidity support to the receiver is guaranteed even in times of stress.
 

Legal basis

Article 29 (2) and Article 34 (2) of the LCR Delegated Act set out the additional objective criteria that have to be fulfilled for the application of preferential inflow and outflow rates in the context of cross-border intragroup credit or liquidity lines. 
 
Article 422 (10) and Article 425 (6) of the CRR mandate the EBA to develop draft regulatory technical standards to further specify such additional objective criteria. These draft RTS fulfill this mandate.
 

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