Commission Delegated Regulation (EU) 2015/61Dangos y teitl llawn

TITLE I THE LIQUIDITY COVERAGE RATIO

Article 1 Subject matter

This Regulation lays down rules to specify in detail the liquidity coverage requirement provided for in Article 412(1) of Regulation (EU) No 575/2013.

Article 2 Scope and application

1. This Regulation shall apply to credit institutions supervised under Directive 2013/36/EU of the European Parliament and of the Council(1).

2. Credit institutions shall comply with this Regulation on an individual basis in accordance with Article 6(4) of Regulation (EU) No 575/2013. The competent authorities may waive in full or in part the application of this Regulation on an individual basis in relation to a credit institution in accordance with Articles 8 and 10 of Regulation (EU) No 575/2013, provided that the conditions laid down therein are met.

3. Where a group comprises one or more credit institutions, the EU parent institution, the institution controlled by an EU parent financial holding company or the institution controlled by an EU parent mixed financial holding company shall apply the obligations laid down in this Regulation on a consolidated basis in accordance with Article 11(3) of Regulation (EU) No 575/2013 and all the following provisions:

(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.

Article 3 Definitions

For the purposes of this Regulation, the following definitions shall apply:

(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(2);

(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:

(a)

a credit institution;

(b)

an investment firm;

(c)

a financial institution;

(d)

a securitisation special purpose vehicle (‘SSPE’);

(e)

a collective investment undertaking (‘CIU’);

(f)

a non-open ended investment scheme;

(g)

an insurance undertaking;

(h)

a reinsurance undertaking;

(i)

a financial holding company or mixed-financial holding company;

(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.

Article 4 The liquidity coverage ratio

1. The detailed liquidity coverage requirement in accordance with Article 412(1) of Regulation (EU) No 575/2013 shall be equal to the ratio of a credit institution's liquidity buffer to its net liquidity outflows over a 30 calendar day stress period and shall be expressed as a percentage. Credit institutions shall calculate their liquidity coverage ratio in accordance with the following formula:

2. Credit institutions shall maintain a liquidity coverage ratio of at least 100 %.

3. By derogation from paragraph 2, credit institutions may monetise their liquid assets to cover their net liquidity outflows during stress periods, even if such a use of liquid assets may result in their liquidity coverage ratio falling below 100 % during such periods.

4. Where at any time the liquidity coverage ratio of a credit institution has fallen or can be reasonably expected to fall below 100 %, the requirement laid down in Article 414 of Regulation (EU) No 575/2013 shall apply. Until the liquidity coverage ratio has been restored to the level referred to in paragraph 2, the credit institution shall report to the competent authority the liquidity coverage ratio in accordance with Commission Implementing Regulation (EU) No 680/2014(3).

5. Credit institutions shall calculate and monitor their liquidity coverage ratio in the reporting currency and in each of the currencies subject to separate reporting in accordance with Article 415(2) of Regulation (EU) No 575/2013, as well as for liabilities in the reporting currency. Credit institutions shall report to their competent authority the liquidity coverage ratio in accordance with the Commission Implementing Regulation (EU) No 680/2014.

Article 5 Stress scenarios for the purposes of the liquidity coverage ratio

The following scenarios may be regarded as indicators of circumstances in which a credit institution may be considered as being subject to stress:

(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.

TITLE II THE LIQUIDITY BUFFER

CHAPTER 1 General provisions

Article 6 Composition of the liquidity buffer

In order to be eligible to form part of a credit institution's liquidity buffer, the liquid assets shall comply with each of the following requirements:

(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.

Article 7 General requirements for liquid assets

1. In order to qualify as liquid assets, the assets of a credit institution shall comply with paragraphs 2 to 6.

2. The assets shall be a property, right, entitlement or interest held by a credit institution and free from any encumbrance. For those purposes, an asset shall be deemed to be unencumbered where the credit institution is not subject to any legal, contractual, regulatory or other restriction preventing it from liquidating, selling, transferring, assigning or, generally, disposing of such asset via active outright sale or repurchase agreement within the following 30 calendar days. The following assets shall be deemed to be unencumbered:

(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.

3. The assets shall not have been issued by the credit institution itself, its parent undertaking, other than a public sector entity that is not a credit institution, its subsidiary or another subsidiary of its parent undertaking or by a securitisation special purpose entity with which the credit institution has close links;

4. The assets shall not have been issued by any of the following:

(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.

5. The value of the assets shall be capable of being determined on the basis of widely disseminated and easily available market prices. In the absence of market-based prices, the value of the assets must be capable of being determined on the basis of an easy-to-calculate formula that uses publicly available inputs and is not significantly dependent upon strong assumptions.

6. The assets shall be listed on a recognised exchange or tradable via active outright sale or via simple repurchase transaction on generally accepted repurchase markets. These criteria shall be assessed separately for each market. An asset admitted to trading in an organised venue which is not a recognised exchange, either in a Member State or in a third country, shall be deemed liquid only where the trading venue provides for an active and sizable market for outright sales of assets. The credit institution shall take into account the following as minimum criteria to assess whether a trading venue provides for an active and sizeable market for the purposes of this paragraph:

(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.

7. The requirements laid down in paragraphs 5 and 6 shall not apply to:

(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.

Article 8 Operational requirements

1. Credit institutions shall have policies and limits in place to ensure that the holdings of liquid assets comprising their liquidity buffer remain appropriately diversified at all times. For those purposes, credit institutions shall take into account the extent of diversification between the various categories of liquid assets and within the same category of liquid assets referred to in Chapter 2 of this Title and any other relevant diversification factors, such as types of issuers, counterparties or the geographical location of those issuers and counterparties.

Competent authorities may impose specific restrictions or requirements on a credit institution's holdings of liquid assets to ensure compliance with the requirement set out in this paragraph. Any such restriction or requirement, however, shall not apply to:

(a) the following categories of level 1 assets:

(i)

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

(ii)

the exposures to central banks as referred to in Articles 10(1)(b) and (d);

(iii)

assets representing claims on or guaranteed by the multilateral developments banks and international organisations referred to in Article 10(1)(g);

(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).

2. Credit institutions shall have ready access to their holdings of liquid assets and be able to monetise them at any time during the 30 calendar day stress period via outright sale or repurchase agreement on generally accepted repurchase markets. A liquid asset shall be deemed readily accessible to a credit institution where there are no legal or practical impediments to the credit institution's ability to monetise such an asset in a timely fashion.

Assets used to provide credit enhancement in structured transactions or to cover operational costs of the credit institutions shall not be deemed as readily accessible to a credit institution.

Assets held in a third country where there are restrictions to their free transferability shall be deemed readily accessible only insofar as the credit institution uses those assets to meet liquidity outflows in that third country. Assets held in a non-convertible currency shall be deemed readily accessible only insofar as the credit institution uses those assets to meet liquidity outflows in that currency.

3. Credit institutions shall ensure that their liquid assets are under the control of a specific liquidity management function within the credit institution. Compliance with this requirement shall be demonstrated to the competent authority either by:

(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.

4. Credit institutions shall regularly, and at least once a year, monetise a sufficiently representative sample of their holdings of liquid assets by means of outright sale or simple repurchase agreement on a generally accepted repurchase market. Credit institutions shall develop strategies for disposing of samples of liquid assets which are adequate to:

(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.

The requirement laid down in the first subparagraph shall not apply to level 1 assets referred to in Article 10, other than extremely high quality covered bonds, to the restricted-use committed liquidity facility referred to in subparagraph (d) of Article 12(1) or to the deposits and other liquidity funding in cooperatives networks and institutional protection schemes referred to in Article 16.

5. The requirement set out in paragraph 2 shall not prevent credit institutions from hedging the market risk associated with their liquid assets provided that the following conditions are met:

(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.

6. Credit institutions shall ensure that the currency denomination of their liquid assets is consistent with the distribution by currency of their net liquidity outflows. However, where appropriate, competent authorities may require credit institutions to restrict currency mismatch by setting limits on the proportion of net liquidity outflows in a currency that can be met during a stress period by holding liquid assets not denominated in that currency. That restriction may only be applied for the reporting currency or a currency that may be subject to separate reporting in accordance with Article 415(2) of Regulation (EU) No 575/2013. In determining the level of any restriction on currency mismatch that may be applied in accordance with this paragraph, competent authorities shall at least have regard to:

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

(i)

use the liquid assets to generate liquidity in the currency and jurisdiction in which the net liquidity outflows arise;

(ii)

swap currencies and raise funds in foreign currency markets during stressed conditions consistent with the 30 calendar day stress period set out in Article 4;

(iii)

transfer a liquidity surplus from one currency to another and across jurisdictions and legal entities within its group during stressed conditions consistent with the 30 calendar day stress period set out in Article 4;

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

Any restriction on currency mismatch imposed in accordance with this paragraph shall be deemed to constitute a specific liquidity requirement as referred to in Article 105 of Directive 2013/36/EU.

Article 9 Valuation of Liquid Assets

For the purposes of calculating its liquidity coverage ratio, a credit institution shall use the market value of its liquid assets. The market value of liquid assets shall be reduced in accordance with the haircuts set out in Chapter 2 and with Article 8(5)(b), where applicable.

CHAPTER 2 Liquid Assets

Article 10 Level 1 assets

1. Level 1 assets shall only include assets falling under one or more of the following categories and meeting in each case the eligibility criteria laid down herein:

(a) coins and banknotes;

(b) the following exposures to central banks:

(i)

assets representing claims on or guaranteed by the European Central Bank (ECB) or a Member State's central bank;

(ii)

assets representing claims on or guaranteed by central banks of third countries, provided that exposures to the central bank or its central government are assigned a credit assessment by a nominated external credit assessment institution (ECAI) which is at least credit quality step 1 in accordance with Article 114(2) of Regulation (EU) No 575/2013;

(iii)

reserves held by the credit institution in a central bank referred to in points (i) and (ii) provided that the credit institution is permitted to withdraw such reserves at any time during stress periods and the conditions for such withdrawal have been specified in an agreement between the relevant competent authority and the ECB or the central bank;

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

(i)

the central government of a Member State;

(ii)

the central government of a third country, provided that it is assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Article 114(2) of Regulation (EU) No 575/2013;

(iii)

regional governments or local authorities in a Member State, provided that they are treated as exposures to the central government of the Member State in accordance with Article 115(2) of Regulation (EU) No 575/2013;

(iv)

regional governments or local authorities in a third country of the type referred to in point (ii), provided that they are treated as exposures to the central government of the third country in accordance with Article 115(4) of Regulation (EU) No 575/2013;

(v)

public sector entities provided that they are treated as exposures to the central government of a Member State or to one of the regional governments or local authorities referred to in point (iii) in accordance with paragraph 4 of Article 116 of Regulation (EU) No 575/2013;

(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:

(i)

the issuer is a credit institution incorporated or established by the central government of a Member State or the regional government or local authority in a Member State, the government or local authority is under the legal obligation to protect the economic basis of the credit institution and maintain its financial viability throughout its life-time and any exposure to that regional government or local authority, as applicable, is treated as an exposure to the central government of the Member State in accordance with Article 115(2) of Regulation (EU) No 575/2013;

(ii)

the credit institution is a promotional lender which, for the purposes of this Article, shall be understood as any credit institution whose purpose is to advance the public policy objectives of the Union or of the central or regional government or local authority in a Member State predominantly through the provision of promotional loans on a non-competitive, not for profit basis, provided that at least 90 % of the loans that it grants are directly or indirectly guaranteed by the central or regional government or local authority and that any exposure to that regional government or local authority, as applicable, is treated as an exposure to the central government of the Member State in accordance with Article 115(2) of Regulation (EU) No 575/2013;

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

(i)

they are bonds as referred to in Article 52(4) of Directive 2009/65/EC or meet the requirements to be eligible for the treatment set out in Article 129(4) or (5) of Regulation (EU) No 575/2013;

(ii)

the exposures to institutions in the cover pool meet the conditions laid down in Article 129(1)(c) and in Article 129(1) last subparagraph of Regulation (EU) No 575/2013;

(iii)

the credit institution investing in the covered bonds and the issuer meet the transparency requirement referred to in Article 129(7) of Regulation (EU) No 575/2013;

(iv)

their issue size is at least EUR 500 million (or the equivalent amount in domestic currency);

(v)

the covered bonds are assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Article 129(4) of Regulation (EU) No 575/2013, the equivalent credit quality step in the event of a short term credit assessment or, in the absence of a credit assessment, they are assigned a 10 % risk weight in accordance with Article 129(5) of that Regulation;

(vi)

the cover pool meets at all times an asset coverage requirement of at least 2 % in excess of the amount required to meet the claims attaching to the covered bonds;

(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.

2. The market value of extremely high quality covered bonds referred to in paragraph 1(f) shall be subject to a haircut of at least 7 %. Except as specified in relation to shares and units in CIUs in points (a) and (b) of Article 15(2), no haircut shall be required on the value of the remaining level 1 assets.

Article 11 Level 2A assets

1. Level 2A assets shall only include assets falling under one or more of the following categories and meeting in each case the eligibility criteria laid down herein:

(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:

(i)

they are bonds as referred to in Article 52(4) of Directive 2009/65/EC or meet the requirements to be eligible for the treatment set out in Article 129(4) or (5) of Regulation (EU) No 575/2013;

(ii)

the exposures to institutions in the cover pool meet the conditions laid down in Article 129(1)(c) of Regulation (EU) No 575/2013;

(iii)

the credit institution investing in the covered bonds and the issuer meet the transparency requirement laid down in Article 129(7) of Regulation (EU) No 575/2013;

(iv)

their issue size is at least EUR 250 million (or the equivalent amount in domestic currency);

(v)

the covered bonds are assigned a credit assessment by a nominated ECAI which is at least credit quality step 2 in accordance with Article 129(4) of Regulation (EU) No 575/2013, the equivalent credit quality step in the event of a short term credit assessment or, in the absence of a credit assessment, they are assigned a 20 % risk weight in accordance with Article 129(5) of that Regulation;

(vi)

the cover pool meets at all times an asset coverage requirement of at least 7 % in excess of the amount required to meet the claims attaching to the covered bonds. However, where covered bonds with a credit quality step 1 credit assessment do not meet the minimum issue size for extremely high quality covered bonds in accordance with point (f)(iv) of Article 10(1) but meet the requirements for high quality covered bonds laid down in points (i), (ii), (iii) and (iv), they shall instead be subject to a minimum asset coverage requirement of 2 %;

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

(i)

they are covered bonds in accordance with the national law of the third country which must define them as debt securities issued by credit institutions, or by a wholly owned subsidiary of a credit institution which guarantees the issue, and secured by a cover pool of assets, in respect of which bondholders shall have direct recourse for the repayment of principal and interest on a priority basis in the event of the issuer's default;

(ii)

the issuer and the covered bonds are subject by the national law in the third country to special public supervision designed to protect bondholders and the supervisory and regulatory arrangements applied in the third country must be at least equivalent to those applied in the Union;

(iii)

the covered bonds are backed by a pool of assets of one or more of the types described in points (b), (d)(i), (f)(i) or (g) of Article 129(1) of Regulation (EU) No 575/2013. Where the pool comprises loans secured by immovable property, the requirements in Articles 208 and 229(1) of Regulation (EU) No 575/2013 must be met;

(iv)

the exposures to institutions in the cover pool meet the conditions laid down in Article 129(1)(c) and in Article 129(1) last subparagraph of Regulation (EU) No 575/2013;

(v)

the credit institution investing in the covered bonds and the issuer meet the transparency requirement laid down in Article 129(7) of Regulation (EU) No 575/2013;

(vi)

the covered bonds are assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Article 129(4) of Regulation (EU) No 575/2013, the equivalent credit quality step in the event of a short term credit assessment or, in the absence of a credit assessment, they are assigned a 10 % risk weight in accordance with Article 129(5) of that Regulation; and

(vii)

the cover pool meets at all times an asset coverage requirement of at least 7 % in excess of the amount required to meet the claims attaching to the covered bonds. However, where the issue size of the covered bonds is EUR 500 million (or the equivalent amount in domestic currency) or higher, they shall instead be subject to a minimum asset coverage requirement of 2 %;

(e) corporate debt securities which meet all of the following requirements:

(i)

they are assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Article 122 of Regulation (EU) No 575/2013 or the equivalent credit quality step in the event of a short term credit assessment;

(ii)

the securities issue size is at least EUR 250 million (or the equivalent in domestic currency);

(iii)

the maximum time to maturity of the securities at the time of issuance is 10 years;

2. The market value of each of the level 2A assets shall be subject to a haircut of at least 15 %.

Article 12 Level 2B assets

1. Level 2B assets shall only include assets falling under one or more of the following categories and meeting in each case the eligibility criteria laid down herein:

(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:

(i)

they have received a credit assessment by a nominated ECAI which is at least credit quality step 3 in accordance with Article 122 of Regulation (EU) No 575/2013 or the equivalent credit quality step in the event of a short term credit assessment;

(ii)

the securities issue size is at least EUR 250 million (or the equivalent in domestic currency);

(iii)

the maximum time to maturity of the securities at the time of issuance is 10 years;

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

(i)

they form part of a major stock index in a Member State or in a third country, as identified as such for the purposes of this point by the competent authority of a Member State or the relevant public authority in a third country. In the absence of any decision from the competent authority or public authority in relation to major stock indexes, credit institutions shall regard as such a stock index composed of leading companies in the relevant jurisdiction;

(ii)

they are denominated in the currency of the credit institution's home Member State or, where denominated in a different currency, they count as level 2B only up to the amount to cover stressed net liquidity outflows in that currency or in the jurisdiction where the liquidity risk is taken; and

(iii)

they have a proven record as a reliable source of liquidity at all times, including during stress periods. This requirement shall be deemed met where the level of decline in the share's stock price or increase in its haircut during a 30 day calendar day market stress period did not exceed 40 % or 40 percentage points, respectively; and

(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:

(i)

they are bonds as referred to in Article 52(4) of Directive 2009/65/EC or meet the requirements to be eligible for the treatment set out in Article 129(4) or (5) of Regulation (EU) No 575/2013;

(ii)

the credit institution investing in the covered bonds meets the transparency requirement laid down in Article 129(7) of Regulation (EU) No 575/2013;

(iii)

the issuer of the covered bonds makes the information referred to in Article 129(7)(a) of Regulation (EU) No 575/2013 available to investors on at least a quarterly basis;

(iv)

their issue size is at least EUR 250 million (or the equivalent amount in domestic currency);

(v)

the covered bonds are collateralised exclusively by the assets referred to in points (a), (d)(i) and (e) of Article 129(1) of Regulation (EU) No 575/2013.

(vi)

the pool of underlying assets consists exclusively of exposures which qualify for a 35 % or lower risk weight under Article 125 of Regulation (EU) No 575/2013 for credit risk;

(vii)

the cover pool meets at all times an asset coverage requirement of at least 10 % in excess of the amount required to meet the claims attaching to the covered bonds;

(viii)

the issuing credit institution needs to publicly disclose on a monthly basis that the cover pool meets the 10 % asset coverage requirement;

(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.

2. The market value of each of the level 2B assets shall be subject to the following minimum haircuts:

(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).

3. For credit institutions which in accordance with their statutes of incorporation are unable for reasons of religious observance to hold interest bearing assets, the competent authority may allow to derogate from points (ii) and (iii) of paragraph 1(b) of this Article, provided there is evidence of insufficient availability of non-interest bearing assets meeting these requirements and the non-interest bearing assets in question are adequately liquid in private markets.

In determining whether the non-interest bearing assets are adequately liquid for the purposes of the first subparagraph, the competent authority shall consider the following factors:

(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.

Article 13 Level 2B securitisations

1. Exposures in the form of asset-backed securities referred to in Article 12(1)(a) shall qualify as level 2B securitisations where they meet the criteria laid down in paragraphs 2 to 14.

2. The securitisation position and the exposures underlying the position shall meet all the following requirements:

(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):

(i)

residential loans secured with a first-ranking mortgage granted to individuals for the acquisition of their main residence, provided that one of the two following conditions is met:

• the loans in the pool meet on average the loan-to-value requirement laid down in point (i) of Article 129(1)(d) of Regulation (EU) No 575/2013;

• the national law of the Member State where the loans were originated provides for a loan-to-income limit on the amount that an obligor may borrow in a residential loan, and that Member State has notified this law to the Commission and EBA. The loan-to-income limit is calculated on the gross annual income of the obligor, taking into account the tax obligations and other commitments of the obligor and the risk of changes in the interest rates over the term of the loan. For each residential loan in the pool, the percentage of the obligor's gross income that may be spent to service the loan, including interest, principal and fee payments, does not exceed 45 %;

(ii)

fully guaranteed residential loans referred to in Article 129(1)(e) of Regulation (EU) No 575/2013, provided that the loans meet the collateralisation requirements laid down in that paragraph and the average loan-to-value requirement laid down in point (i) of Article 129(1)(d) of Regulation (EU) No 575/2013

(iii)

commercial loans, leases and credit facilities to undertakings established in a Member State to finance capital expenditures or business operations other than the acquisition or development of commercial real estate, provided that at least 80 % of the borrowers in the pool in terms of portfolio balance are small and medium-sized enterprises at the time of issuance of the securitisation, and none of the borrowers is an institution as defined in Article 4(1)(3) of Regulation (EU) No 575/2013;

(iv)

auto loans and leases to borrowers or lessees established or resident in a Member State. For these purposes, they shall include loans or leases for the financing of motor vehicles or trailers as defined in points (11) and (12) of Article 3 of Directive 2007/46/EC of the European Parliament and of the Council, agricultural or forestry tractors as referred to in Directive 2003/37/EC of the European Parliament and of the Council, motorcycles or motor tricycles as defined in points (b) and (c) of Article 1(2) of Directive 2002/24/EC of the European Parliament and of the Council or tracked vehicles as referred to in point (c) of Article 2(2) of Directive 2007/46/EC. Such loans or leases may include ancillary insurance and service products or additional vehicle parts, and in the case of leases, the residual value of leased vehicles. All loans and leases in the pool shall be secured with a first-ranking charge or security over the vehicle or an appropriate guarantee in favour of the SSPE, such as a retention of title provision;

(v)

loans and credit facilities to individuals resident in a Member State for personal, family or household consumption purposes.

(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:

(i)

has declared bankruptcy, agreed with his creditors to a debt dismissal or reschedule or had a court grant his creditors a right of enforcement or material damages as a result of a missed payment within three years prior to the date of origination;

(ii)

is on an official registry of persons with adverse credit history;

(iii)

has a credit assessment by an ECAI or has a credit score indicating a significant risk that contractually agreed payments will not be made compared to the average obligor for this type of loans in the relevant jurisdiction.

(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.

3. The repayment of the securitisation positions shall not have been structured to depend, predominantly, on the sale of assets securing the underlying exposures. However, this provision shall not prevent such exposures from being subsequently rolled-over or refinanced.

4. The structure of the securitisation transaction shall comply with the following requirements:

(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:

(i)

a deterioration in the credit quality of the underlying exposures;

(ii)

a failure to generate sufficient new underlying exposures of at least similar credit quality;

(iii)

the occurrence of an insolvency-related event with regard to the originator or the servicer;

5. At the time of issuance of the securitisation, the borrowers (or, where applicable, the guarantors) shall have made at least one payment except where the securitisation is backed by credit facilities referred to in point (g)(v)of paragraph 2.

6. In the case of securitisations where the underlying exposures are residential loans referred to in points (g)(i) and (ii) of paragraph 2, the pool of loans shall not include any loan that was marketed and underwritten on the premise that the loan applicant or, where applicable intermediaries, were made aware that the information provided might not be verified by the lender.

7. In the case of securitisations where the underlying exposures are residential loans referred to in points (g)(i) and (ii) of paragraph 2, the assessment of the borrower's creditworthiness shall meet the requirements set out in paragraphs 1 to 4, 5(a), and 6 of Article 18 of Directive 2014/17/EU of the European Parliament and of the Council or equivalent requirements in third countries(4).

8. In the case of securitisations where the underlying exposures are auto loans and leases and consumer loans and credit facilities referred to in points (g)(iv) and (v) of paragraph 2, the assessment of the borrower's creditworthiness shall meet the requirements set out in Article 8 of Directive 2008/48/EC of the European Parliament and of the Council(5).

9. Where the originator, sponsor or original lender of the securitisation is established in the Union, it complies with the requirements laid down in Part Five of Regulation (EU) No 575/2013 and discloses information, in accordance with Article 8b of Regulation (EU) No 1060/2009, on the credit quality and performance of the underlying exposures, the structure of the transaction, the cash flows and any collateral supporting the exposures as well as any information that is necessary for investors to conduct comprehensive and well-informed stress tests. Where the originator, sponsor and original lender are established outside the Union, comprehensive loan-level data in compliance with standards generally accepted by market participants are made available to existing and potential investors and regulators at issuance and on a regular basis.

10. The underlying exposures shall not have been originated by the credit institution holding the securitisation position in its liquidity buffer, its subsidiary, its parent undertaking, a subsidiary of its parent undertaking or any other undertaking closely linked with that credit institution.

11. The issue size of the tranche shall be at least EUR 100 million (or the equivalent amount in domestic currency).

12. The remaining weighted average life of the tranche shall be 5 years or less, which shall be calculated using the lower of either the transaction's pricing prepayment assumption or a 20 % constant prepayment rate, for which the credit institution shall assume that the call is exercised on the first permitted call date.

13. The originator of the exposures underlying the securitisation shall be an institution as defined in Article 4(3) of Regulation (EU) No 575/2013 or an undertaking whose principal activity is to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36/EU.

14. The market value of level 2B securitisations shall be subject to the following minimum haircuts:

(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.

Article 14 Restricted-use committed liquidity facilities

In order to qualify as level 2B assets, the restricted-use committed liquidity facilities that may be provided by a central bank as referred to in paragraph (1)(d) of Article 12 shall fulfil all of the following criteria:

(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:

(i)

75 basis points per annum; or

(ii)

at least 25 basis points per annum above the difference in yield on the assets used to back the facility and the yield on a representative portfolio of liquid assets, after adjusting for any material differences in credit risk;

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:

(i)

they are held in a form which facilitates their prompt transfer to the central bank in the event of the facility being called;

(ii)

their value post-haircut as applied by the central bank is sufficient to cover the total amount of the facility;

(iii)

they are not to be counted as liquid assets for the purposes of the credit institution's liquidity buffer;

(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.

Article 15 CIUs

1. Shares or units in CIUs shall qualify as liquid assets of the same level as the liquid assets underlying the relevant undertaking up to an absolute amount of EUR 500 million (or equivalent amount in domestic currency) for each credit institution on an individual basis, provided that:

(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.

2. Credit institutions shall apply the following minimum haircuts to the value of their shares or units in CIUs depending on the category of underlying liquid assets:

(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).

3. The approach referred to in paragraph 2 shall be applied as follows:

(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.

4. Credit institutions shall develop robust methodologies and processes to calculate and report the market value and haircuts for shares or units in CIUs. Where the exposure is not sufficiently material for a credit institution to develop its own methodologies and provided that, in each case, the competent authority is satisfied that this condition has been met, a credit institution may only rely on the following third parties to calculate and report the haircuts for shares or units in CIUs:

(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.

5. Where a credit institution fails to comply with the requirements laid down in paragraph 4 of this Article in relation to shares or units in a CIU, it shall cease to recognise them as liquid assets for the purposes of this Regulation in accordance with Article 18.

Article 16 Deposits and other funding in cooperative networks and institutional protection schemes

1. Where a credit institution belongs to an institutional protection scheme of the type referred to in Article 113(7) of Regulation (EU) No 575/2013, to a network that would be eligible for the waiver provided for in Article 10 of that Regulation or to a cooperative network in a Member State, the sight deposits that the credit institution maintains with the central institution shall be treated as liquid assets in accordance with one of the following provisions:

(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 %.

2. Where under the law of a Member State or the legally binding documents governing one of the networks or schemes described in paragraph 1 the credit institution has access within 30 calendar days to liquidity funding from the central institution or from other institution within the same network or scheme, such funding shall be treated as a level 2B asset to the extent that it is not collateralised by liquid assets of a specified level or category. A minimum haircut of 25 % shall be applied to the committed principal amount of the liquidity funding.

Article 17 Composition of the liquidity buffer by asset level

1. Credit institutions shall comply at all times with the following requirements on the composition of their liquidity buffer:

(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.

2. The requirements set out in paragraph 1 shall be applied after adjusting for the impact on the stock of liquid assets of secured funding, secured lending or collateral swap transactions using liquid assets where these transactions mature within 30 calendar days, after deducting any applicable haircuts and provided that the credit institution complies with the operational requirements laid down in Article 8.

3. Credit institutions shall determine the composition of their liquidity buffer in accordance with the formulae laid down in Annex I to this Regulation.

Article 18 Breach of requirements

1. Where a liquid asset ceases to comply with any applicable general requirements laid down in Article 7, the operational requirements laid down in Article 8(2) or any applicable eligibility criteria laid down in this Chapter, the credit institution shall cease to recognise it as a liquid asset no later than 30 calendar days from the date when the breach of requirements occurred.

2. Paragraph 1 shall apply to shares or units in a CIU ceasing to meet eligibility requirements only where they do not exceed 10 % of the CIU's overall assets.

Article 19 Alternative liquidity approaches

1. Where there are insufficient liquid assets in a given currency for credit institutions to meet the liquidity coverage ratio laid down in Article 4, one or more of the following provisions shall apply:

(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:

(i)

it is contractually irrevocably committed for the next 30 calendar days;

(ii)

it is priced with a fee which is payable regardless of the amount, if any, drawn down against that facility;

(iii)

the fee is set in an amount such that the net yield on the assets used to secure the facility must not be higher than the net yield on a representative portfolio of liquidity assets, after adjusting for any material differences in credit risk.

(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.

2. Credit institutions shall apply the derogations provided for in paragraph 1 on an inversely proportional basis with regard to the availability of the relevant liquid assets. Credit institutions shall assess their liquidity needs for the application of this Article taking into account their ability to reduce, by sound liquidity management, the need for those liquid assets and the holdings of those assets by other market participants.

3. The currencies which may benefit from the derogations laid down in paragraph 1 and the extent to which one or more derogations may be available in total for a given currency shall be determined by the implementing regulation to be adopted by the Commission in accordance with Article 419(4) of Regulation (EU) No 575/2013.

4. The detailed conditions applicable to the use of the derogations laid down in paragraph 1(a) and (b) shall be determined by the delegated act to be adopted by the Commission in accordance with Article 419(5) of Regulation (EU) No 575/2013.

TITLE III LIQUIDITY OUTFLOWS AND INFLOWS

CHAPTER 1 Net Liquidity outflows

Article 20 Definition of net liquidity outflows

1. The net liquidity outflows shall be the sum of liquidity outflows in point (a) reduced by the sum of liquidity inflows in point (b), but shall not be less than zero, and shall be calculated as follows:

(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:

(i)

the inflows exempted from the cap as referred to in Article 33(2) and (3);

(ii)

the lower of the inflows referred to in Article 33(4) and 90 % of the outflows referred to in (a) reduced by the exempt inflows in Article 33(2) and (3), but not less than zero;

(iii)

the lower of the inflows other than those referred to in Article 33(2), (3) and (4) and 75 % of the outflows referred to in (a) reduced by the exempt inflows in Article 33(2) and (3) and the inflows in Article 33(4) divided by 0,9 to allow for the effect of the 90 % cap, but not less than zero.

2. Liquidity inflows and liquidity outflows shall be assessed over a 30 calendar day stress period, under the assumption of a combined idiosyncratic and market-wide stress scenario as referred to in Article 5.

3. The calculation laid down in paragraph 1 shall be performed in accordance with the formula set out in Annex II.

Article 21 Requirements for assessing the effect of collateral received in derivatives transactions

Credit institutions shall calculate liquidity outflows and inflows expected over a 30 calendar day period for the contracts listed in Annex II of Regulation (EU) No 575/2013 on a net basis by counterparty subject to the existence of bilateral netting agreements in accordance with Article 295 of that Regulation. For the purposes of this Article, net basis shall be considered to be net of collateral to be received provided that it qualifies as a liquid asset under Title II of this Regulation. Cash outflows and inflows arising from foreign currency derivative transactions that involve a full exchange of principal amounts on a simultaneous basis (or within the same day) shall be calculated on a net basis, even where those transactions are not covered by a bilateral netting agreement.

CHAPTER 2 Liquidity outflows

Article 22 Definition of liquidity outflows

1. Liquidity outflows shall be calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down as indicated in this Chapter.

2. Liquidity outflows referred to in paragraph 1 shall include, in each case multiplied by the applicable outflow rate:

(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.

Article 23 Additional liquidity outflows for other products and services

1. Credit institutions shall regularly assess the likelihood and potential volume of liquidity outflows during 30 calendar days for products or services which are not referred to in Articles 27 to 31 and which they offer or sponsor or which potential purchasers would consider associated with them. Those products or services shall include, but not be limited to, the liquidity outflows resulting from any of the contractual arrangements referred to in Article 429 and in Annex I of Regulation (EU) No 575/2013, such as:

(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.

2. The outflows referred to in paragraph 1 shall be assessed under the assumption of a combined idiosyncratic and market-wide stress as referred to in Article 5. For that assessment, credit institutions shall particularly take into account material reputational damage that could result from not providing liquidity support to such products or services. Credit institutions shall report at least once a year to the competent authorities those products and services for which the likelihood and potential volume of the liquidity outflows referred to in paragraph 1 are material and the competent authorities shall determine the outflows to be assigned. The competent authorities may apply an outflow rate of up to 5 % for trade finance off-balance sheet related products as referred to in Article 429 and Annex I of Regulation (EU) No 575/2013.

3. The competent authorities shall at least once a year report to the EBA the types of products or services for which they have determined outflows on the basis of the reports from credit institutions, and shall include in that report an explanation of the methodology applied to determine the outflows.

Article 24 Outflows from stable retail deposits

1. Unless the criteria for a higher outflow rate under Article 25(2), (3) or (5) are fulfilled, the amount of retail deposits covered by a deposit guarantee scheme in accordance with Directive 94/19/EC of the European Parliament and of the Council(6) or Directive 2014/49/EU or an equivalent deposit guarantee scheme in a third country shall be considered as stable and multiplied by 5 % where the deposit is either:

(a) part of an established relationship making withdrawal highly unlikely; or

(b) held in a transactional account.

2. For the purpose of paragraph 1(a) a retail deposit shall be considered to be part of an established relationship where the depositor meets at least one of the following criteria:

(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.

3. For the purposes of paragraph 1(b) a retail deposit shall be considered as being held in a transactional account where salaries, income or transactions are regularly credited and debited respectively against that account.

4. By way of derogation from paragraph 1, from 1 January 2019 competent authorities may authorise credit institutions to multiply by 3 % the amount of the stable retail deposits referred to in paragraph 1 covered by a deposit guarantee scheme in accordance with Directive 2014/49/EU up to a maximum level of EUR 100 000 as specified in Article 6(1) of that Directive, provided that the Commission has confirmed that the officially recognised deposit guarantee scheme meets all of the following criteria:

(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.

5. Competent authorities shall only grant the authorisation referred to in paragraph 4 after having obtained prior approval from the Commission. Such approval shall be requested by means of a reasoned notification, which shall include evidence that the run-off rates for stable retail deposits would be below 3 % during any stress period experienced consistent with the scenarios referred to in Article 5. The reasoned notification shall be submitted to the Commission at least three months prior to the date from which authorisation is requested. The Commission shall assess the compliance of the relevant deposit guarantee scheme with the conditions set out in paragraph 4(a), (b) and (c). Where those conditions are fulfilled, the Commission shall approve the competent authority's request to grant authorisation unless there exist overriding grounds for withholding approval having regard to the functioning of the internal market for retail deposits. All credit institutions affiliated to such an approved deposit guarantee scheme shall be entitled to apply the 3 % outflow rate. The Commission shall seek the opinion of the EBA on the conformity of the relevant deposit guarantee scheme with the conditions set out in paragraph 4(a), (b) and (c).

6. Credit institutions may be authorised by their competent authority to multiply by 3 % the amount of the retail deposits covered by a deposit guarantee scheme in a third country equivalent to the scheme referred to in paragraph 1 if the third country allows this treatment.

Article 25 Outflows from other retail deposits

1. Credit institutions shall multiply by 10 % other retail deposits, including that part of retail deposits not covered by Article 24, unless the conditions laid down in paragraph 2 apply.

2. Other retail deposits shall be subject to higher outflow rates, as determined by the credit institution, in accordance with paragraph 3, where the following conditions are met:

(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:

(i)

the rate significantly exceeds the average rate for similar retail products;

(ii)

its return is derived from the return on a market index or set of indices;

(iii)

its return is derived from any market variable other than a floating interest rate;

(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;

3. Credit institutions shall apply a higher outflow rate determined as follows:

(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.

On a case by case basis, competent authorities may apply a higher outflow rate where justified by the specific circumstances of the credit institution. Credit institutions shall apply the outflow rate referred to in paragraph 3(b) to retail deposits where the assessment referred to paragraph 2 has not been carried out or is not completed.

4. Credit institutions may exclude from the calculation of outflows certain clearly circumscribed categories of retail deposits as long as in each and every instance the credit institution rigorously applies the following provisions for the whole category of those deposits, unless an exception can be justified on the basis of circumstances of hardship for the depositor:

(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.

If a portion of the deposit referred to in the first subparagraph can be withdrawn without incurring such a penalty, only that portion shall be treated as a demand deposit and the remaining balance shall be treated as a term deposit as referred to in this paragraph. An outflow rate of 100 % shall be applied to cancelled deposits with a residual maturity of less than 30 calendar days and where pay-out has been agreed to another credit institution.

5. By derogation from paragraphs 1 to 4 and Article 24, credit institutions shall multiply retail deposits that they have taken in third countries by a higher percentage outflow rate if such a percentage is provided for by the national law establishing liquidity requirements in that third country.

Article 26 Outflows with inter-dependent inflows

Subject to prior approval of the competent authority, credit institutions may calculate the liquidity outflow net of an interdependent inflow which meets all the following conditions:

(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:

(i)

it arises compulsorily before the outflow;

(ii)

it is received within 10 days and is guaranteed by the central government of a Member State.

Article 27 Outflows from operational deposits

1. Credit institutions shall multiply by 25 % liabilities resulting from deposits that are maintained as follows:

(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.

2. By derogation from paragraph 1, credit institutions shall multiply by 5 % the portion of liabilities resulting from deposits referred to in paragraph 1(a) which is covered by a deposit guarantee scheme in accordance with Directive 94/19/EC or Directive 2014/49/EU or an equivalent deposit guarantee scheme in a third country.

3. Deposits from credit institutions placed at the central institution that are considered as liquid assets for the depositing credit institution in accordance with Article 16 shall be multiplied by a 100 % outflow rate for the central institution on the amount of these liquid assets after haircut. These liquid assets shall not be counted to cover outflows other than the outflow referred to in the first sentence of this paragraph and shall be disregarded for the purposes of the calculations of the composition of the remaining liquidity buffer under Article 17 for the central institution at individual level.

4. Clearing, custody, cash management or other comparable services referred to in points (a) and (d) of paragraph 1 only cover such services to the extent that they are rendered in the context of an established relationship which is critically important to the depositor. Deposits referred to in points (a), (c) and (d) of paragraph 1 shall have significant legal or operational limitations that make significant withdrawals within 30 calendar days unlikely. Funds in excess of those required for the provision of operational services shall be treated as non-operational deposits.

5. Deposits arising out of a correspondent banking relationship or from the provision of prime brokerage services shall not be treated as an operational deposit and shall receive a 100 % outflow rate.

6. In order to identify the deposits referred to in point (c) of paragraph 1, a credit institution shall consider that there is an established operational relationship with a non-financial customer, excluding term deposits, savings deposits and brokered deposits, where all of the following criteria are met:

(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:

(i)

the relationship with the depositor has existed for at least 24 months;

(ii)

the deposit is used for a minimum of 2 active services. These services may include direct or indirect access to national or international payment services, security trading or depository services.

Only that part of the deposit which is necessary to make use of the service of which the deposit is a by-product shall be treated as an operational deposit. The excess shall be treated as non-operational.

Article 28 Outflows from other liabilities

1. Credit institutions shall multiply liabilities resulting from deposits by clients that are non-financial customers, sovereigns, central banks, multilateral development banks, public sector entities, credit unions authorised by a competent authority, personal investment companies or by clients that are deposit brokers, to the extent they do not fall under Article 27 by 40 %.

By derogation from the first subparagraph, where the liabilities referred to in that subparagraph are covered by a deposit guarantee scheme in accordance with Directive 94/19/EC or Directive 2014/49/EU or an equivalent deposit guarantee scheme in a third country they shall be multiplied by 20 %.

2. Credit institutions shall multiply liabilities resulting from the institution's own operating expenses by 0 %.

3. Credit institutions shall multiply liabilities resulting from secured lending and capital market-driven transactions maturing within 30 calendar days as defined in Article 192(2) and (3) of Regulation (EC) No 575/2013 by:

(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 %:

(i)

if they are collateralised by the assets referred to in points (i), (ii) or (iv) of Article 13(2)(g);

(ii)

if they are collateralised by assets that would not qualify as liquid assets in accordance with Articles 10 and 11 and the lender is the central government, a public sector entity of the Member State or of a third country in which the credit institution has been authorised or has established a branch, or a multilateral development bank. Public sector entities that receive that treatment shall be limited to those that have a risk weight of 20 % or lower in accordance with Article 116(4) and (5) of Regulation (EU) No 575/2013;

(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:

(i)

corporate debt securities that would qualify as level 2B assets in accordance with Article 12(1)(b);

(ii)

shares that would qualify as level 2B assets in accordance with Article 12(1)(c);

(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.

4. Collateral swaps that mature within the next 30 days shall lead to an outflow for the excess liquidity value of the assets borrowed compared to the liquidity value of the assets lent unless the counterparty is a central bank in which case a 0 % outflow shall apply.

5. The offsetting balances held in segregated accounts related to client protection regimes imposed by national regulations shall be treated as inflows in accordance with Article 32 and shall be excluded from the stock of liquid assets.

6. Credit institutions shall apply a 100 % outflow rate to all notes, bonds and other debt securities issued by the credit institution, unless the bond is sold exclusively in the retail market and held in a retail account, in which case those instruments can be treated as the appropriate retail deposit category. Limitations shall be placed such that those instruments cannot be bought and held by parties other than retail customers.

Article 29 Outflows within a group or an institutional protection scheme

1. By way of derogation from Article 31 competent authorities may authorise the application of a lower outflow rate on a case by case basis for undrawn credit or liquidity facilities when all of the following conditions are fulfilled:

(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(7) 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.

2. Competent authorities may waive the condition set out in point (d) of paragraph 1 where Article 20(1)(b) of Regulation (EU) No 575/2013 is applied. In that case, the following additional objective criteria have to be met:

(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,

Where such a lower outflow rate is permitted to be applied, the competent authority shall inform EBA about the result of the process referred to in Article 20(1)(b) of Regulation (EU) No 575/2013. Fulfilment of the conditions for such lower outflows shall be regularly reviewed by the competent authority.

Article 30 Additional outflows

1. Collateral other than cash and assets referred to in Article 10 which is posted by the credit institution for contracts listed in Annex II of Regulation (EU) No 575/2013 and credit derivatives, shall be subject to an additional outflow of 20 %.

Collateral in assets referred to in Article 10(1)(f) which is posted by the credit institution for contracts listed in Annex II of Regulation (EU) No 575/2013 and credit derivatives shall be subject to an additional outflow of 10 %.

2. Credit institutions shall calculate and notify to the competent authorities an additional outflow for all contracts entered into the contractual conditions of which lead within 30 calendar days and following a material deterioration of the credit quality of the credit institution to additional liquidity outflows or collateral needs. Credit institutions shall notify the competent authorities of this outflow no later than the submission of the reporting in accordance with Article 415 of Regulation (EU) No 575/2013. Where competent authorities consider such outflows material in relation to the potential liquidity outflows of the credit institution, they shall require the credit institution to add an additional outflow for those contracts corresponding to the additional collateral needs or cash outflows resulting from a material deterioration in the credit quality of the credit institution corresponding to a downgrade in its external credit assessment by three notches. The credit institution shall apply a 100 % outflow rate to those additional collateral or cash outflows. The credit institution shall regularly review the extent of this material deterioration in the light of what is relevant under the contracts it has entered into and shall notify the result of its review to the competent authorities.

3. The credit institution shall add an additional outflow corresponding to collateral needs that would result from the impact of an adverse market scenario on the credit institution's derivatives transactions, financing transactions and other contracts if material. This calculation shall be made in accordance with the delegated act to be adopted by the Commission pursuant to Article 423(3) of Regulation (EU) No 575/2013.

4. Credit institutions shall take outflows and inflows expected over 30 calendar days from the contracts listed in Annex II of Regulation (EU) No 575/2013 into account on a net basis in accordance with Article 21. In the case of a net outflow, the credit institution shall multiply the result by 100 % outflow rate. Credit institutions shall exclude from such calculations those liquidity requirements that would result from the application of paragraphs 1, 2 and 3.

5. The credit institution shall add an additional outflow corresponding to 100 % of the market value of securities or other assets sold short and to be delivered within 30 calendar days unless the credit institution owns the securities to be delivered or has borrowed them at terms requiring their return only after 30 calendar days and the securities do not form part of the liquid assets of credit institutions. If the short position is being covered by a collateralised securities financing transaction, the credit institution shall assume the short position will be maintained throughout the 30 calendar day period and receive a 0 % outflow.

6. The credit institution shall add an additional outflow corresponding to 100 % of:

(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.

7. Deposits received as collateral shall not be considered as liabilities for the purposes of Article 27 or 29 but shall be subject to the provisions of paragraphs 1 to 6 of this Article where applicable.

8. Credit institutions shall assume a 100 % outflow for loss of funding on asset-backed securities, covered bonds and other structured financing instruments maturing within 30 calendar days, when these instruments are issued by the credit institution itself or by conduits or SPVs sponsored by the credit institution.

9. Credit institutions shall assume a 100 % outflow for loss of funding on asset-backed commercial papers, conduits, securities investment vehicles and other such financing facilities. This 100 % outflow rate shall apply to the maturing amount or to the amount of assets that could potentially be returned or the liquidity required.

10. For that portion of financing programs under paragraphs 8 and 9, credit institutions that are providers of associated liquidity facilities do not need to double count the maturing financing instrument and the liquidity facility for consolidated programs.

11. Assets borrowed on an unsecured basis and maturing within 30 calendar days shall be assumed to run-off in full, leading to a 100 % outflow of liquid assets unless the credit institution owns the securities and they do not form part of the credit institution's liquidity buffer.

12. In relation to the provision of prime brokerage services, where a credit institution has financed the assets of one client by internally netting them against the short sales of another client, such transactions shall be subject to a 50 % outflow for the contingent obligation, since in the event of client withdrawals the credit institution may be obliged to find additional sources of funding to cover these positions.

Article 31 Outflows from credit and liquidity facilities

1. For the purpose of this Article, a liquidity facility shall be understood to mean any committed, undrawn back-up facility that would be utilised to refinance the debt obligations of a customer in situations where such a customer is unable to rollover that debt in financial markets. Its amount shall be calculated as the amount of the debt issued by the customer currently outstanding and maturing within 30 calendar days that is backstopped by the facility. The portion of the liquidity facility that is backing a debt that does not mature within 30 calendar days shall be excluded from the scope of the definition of the facility. Any additional capacity of the facility shall be treated as a committed credit facility with the associated drawdown rate as specified in this Article. General working capital facilities for corporate entities will not be classified as liquidity facilities, but as credit facilities.

2. Credit institutions shall calculate outflows for credit and liquidity facilities by multiplying the amount of the credit and liquidity facilities by the corresponding outflow rates set out in paragraphs 3 to 5. Outflows from committed credit and liquidity facilities shall be determined as a percentage of the maximum amount that can be drawn down within 30 calendar days, net of any liquidity requirement that would be applicable under Article 23 for the trade finance off-balance sheet items and net of any collateral made available to the credit institution and valued in accordance with Article 9, provided that the collateral fulfils all of the following conditions:

(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.

If the necessary information is available to the credit institution, the maximum amount that can be drawn down for credit and liquidity facilities shall be determined as the maximum amount that could be drawn down given the counterparty's own obligations or given the pre-defined contractual drawdown schedule coming due over 30 calendar days.

3. The maximum amount that can be drawn down from undrawn committed credit facilities and undrawn committed liquidity facilities within the next 30 calendar days shall be multiplied by 5 % if they qualify for the retail deposit exposure class.

4. The maximum amount that can be drawn down from undrawn committed credit facilities within 30 calendar days shall be multiplied by 10 % where they meet the following conditions:

(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.

5. The maximum amount that can be drawn down from undrawn committed liquidity facilities within the next 30 calendar days shall be multiplied by 30 % where they meet the conditions referred to in paragraph 4 points (a) and (b), and by 40 % when they are provided to personal investment companies.

6. The undrawn committed amount of a liquidity facility that has been provided to an SSPE for the purpose of enabling such an SSPE to purchase assets, other than securities from clients that are not financial customers, shall be multiplied by 10 % to the extent that it exceeds the amount of assets currently purchased from clients and where the maximum amount that can be drawn down is contractually limited to the amount of assets currently purchased.

7. The central institution of a scheme or network referred to in Article 16 shall multiply by a 75 % outflow rate the liquidity funding committed to a member credit institution where such member credit institution may treat the liquidity funding as a liquid asset in accordance with Article 16(2). The 75 % outflow rate shall be applied on the committed principal amount of the liquidity funding.

8. The credit institution shall multiply the maximum amount that can be drawn down from other undrawn committed credit and undrawn committed liquidity facilities within 30 calendar days by the corresponding outflow rate as follows:

(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.

9. By way of derogation from paragraphs 1 to 8, credit institutions which have been set up and are sponsored by the central or regional government of at least one Member State may apply the treatments set out in paragraphs 3 and 4 to credit and liquidity facilities that are extended to promotional lenders for the sole purpose of directly or indirectly funding promotional loans, provided that those loans meet the requirements for the outflow rates referred to in paragraphs 3 and 4.

By way of derogation from Article 32(3)(g), where those promotional loans are extended as pass through loans via another credit institution acting as an intermediary, a symmetric inflow and outflow may be applied by credit institutions.

The promotional loans referred to in this paragraph shall be available only to persons who are not financial customers on a non-competitive, not for profit basis in order to promote public policy objectives of the Union or that Member State's central or regional government. It shall only be possible to draw on such facilities following the reasonably expected demand for a promotional loan and up to the amount of such demand provided there is a subsequent reporting on the use of the funds distributed.

10. Credit institutions shall multiply by 100 % any liquidity outflows resulting from liabilities that become due in 30 calendar days other than those referred to in Articles 23 to 31.

CHAPTER 3 Liquidity inflows

Article 32 Inflows

1. Liquidity inflows shall be assessed over a period of 30 calendar days. They shall comprise only contractual inflows from exposures that are not past due and for which the credit institution has no reason to expect non-performance within 30 calendar days.

2. Liquidity inflows shall receive a 100 % inflow rate, including in particular the following inflows:

(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:

(i)

securities maturing within 30 calendar days;

(ii)

trade finance transactions referred to in point (b) of the second subparagraph of Article 162(3) of Regulation (EU) No 575/2013 with a residual maturity of less than 30 calendar days;

(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;

3. By derogation from paragraph 2, the inflows set out in this paragraph shall be subject to the following requirements:

(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.

4. Point (a) of paragraph 3 shall not apply to 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 that are collateralised by liquid assets in accordance with Title II as referred to in point (b) of paragraph 3. Inflows from the release of balances held in segregated accounts in accordance with regulatory requirements for the protection of customer trading assets shall be taken into account in full, provided that those segregated balances are maintained in liquid assets as defined in Title II.

5. Outflows and inflows expected over 30 calendar days from the contracts listed in Annex II of Regulation (EU) No 575/2013 shall be calculated on a net basis as referred to in Article 21 and shall be multiplied by 100 % in the event of a net inflow.

6. Credit institutions shall not take into account any inflows from any of the liquid assets referred to in Title II other than payments due on the assets that are not reflected in the market value of the asset.

7. Credit institutions shall not take into account inflows from any new obligations entered into.

8. Credit institutions shall take liquidity inflows which are to be received in third countries where there are transfer restrictions or which are denominated in non-convertible currencies into account only to the extent that they correspond to outflows respectively in the third country or currency in question.

Article 33 Cap on Inflows

1. Credit institutions shall limit the recognition of liquidity inflows to 75 % of total liquidity outflows as defined in Chapter 2 unless a specific inflow is exempted as referred to in paragraphs 2, 3 or 4.

2. Subject to the prior approval of the competent authority, the credit institution may fully or partially exempt from the cap referred to in paragraph 1 the following liquidity inflows:

(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.

3. Subject to the prior approval of the competent authority, specialised credit institutions may be exempted from the cap on inflows when their main activities are leasing and factoring business, excluding the activities described in paragraph 4, and the conditions laid down in paragraph 5 are met.

4. Subject to the prior approval of the competent authority, specialised credit institutions may be subject to a cap on inflows of 90 % when the conditions laid down in paragraph 5 are met and their main activities are the following:

(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.

5. Credit institutions referred to in paragraph 3 may be exempted from the cap on inflows and credit institutions referred to in paragraph 4 may apply a higher cap of 90 % provided they meet the following conditions:

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

(i)

the timing of inflows matches the timing of outflows;

(ii)

at individual level the credit institution is not significantly financed by retail deposits;

(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.

Competent authorities shall inform the EBA which specialised credit institutions have been exempted or are subject to a higher cap along with a justification. The EBA shall publish and maintain a list of the specialised credit institutions exempted or subject to a higher cap. The EBA may request supporting documentation.

6. The exemptions laid down in paragraphs 2, 3 4, when approved by the competent authority, may be applied at both the individual and consolidated levels subject to Article 2(3)(e).

7. Credit institutions shall determine the amount of the net liquidity outflows under the application of the inflow cap in accordance with the formula laid down in Annex II to this Regulation

Article 34 Inflows within a group or an institutional protection scheme

1. By way of derogation from Article 32(3)(g), competent authorities may authorise the application of a higher inflow rate on a case by case basis for undrawn credit and liquidity facilities when all of the following conditions are fulfilled:

(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.

2. Where the credit institution and the counterparty credit institution are established in different Member States, competent authorities may waive the condition set out in point (d) of paragraph 1 where, in addition to the criteria in paragraph 1, the following additional objective criteria (a) to (c) are fulfilled:

(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.

The competent authorities shall work together in full consultation in accordance with Article 20(1)(b) of Regulation (EU) No 575/2013 to determine whether the additional criteria set out in this paragraph are met.

3. Where the additional criteria laid down in paragraph 2 are met, the competent authority of the liquidity receiver shall be allowed to apply a preferential inflow rate of up to 40 %. However, the approval of both competent authorities shall be required for any preferential rate higher than 40 %, which shall be applied on a symmetric basis.

Where the application of a preferential inflow rate above 40 % is authorised, the competent authorities shall inform EBA about the result of the process referred to in paragraph 2. The competent authorities shall review regularly that the conditions for such higher inflows continue to be fulfilled.

TITLE IV FINAL PROVISIONS

Article 35 Grandfathering of Member State-guaranteed bank assets

1. Assets issued by credit institutions which benefit from a guarantee from the central government of a Member State shall qualify as level 1 assets only where the guarantee:

(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.

2. Where the guarantor is a regional government or local authority in a Member State, the guaranteed asset shall qualify as level 1 only where exposures to such regional government or local authority are treated as exposures to their central government in accordance with Article 115(2) of Regulation (EU) No 575/2013 and the guarantee complies with the requirements laid down in paragraph 1.

3. The assets referred to in paragraphs 1 and 2 shall continue to qualify as level 1 assets for as long as the guarantee remains in force in relation to the relevant issuer or its assets, as applicable, as amended or replaced from time to time. Where the amount of a guarantee in favour of an issuer or its assets is increased at any time after 30 June 2014, the assets shall only qualify as liquid assets up to the maximum amount of the guarantee that was committed prior to that date.

4. The assets referred to in this Article shall be subject to the same requirements applicable under this Regulation to level 1 assets representing claims on or guaranteed by the central or regional governments, local authorities or public sector entities referred to in Article 10(1)(c).

5. Where a credit institution or its assets benefit from a guarantee scheme, the scheme as a whole shall be regarded as a guarantee for the purposes of this Article.

Article 36 Transitional provision for Member State-sponsored impaired asset management agencies

1. The senior bonds issued by the following Member State-sponsored impaired assets management agencies shall qualify as level 1 assets until 31 December 2023:

(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);

2. The assets referred to in paragraph 1 shall be subject to the same requirements applicable under this Regulation to level 1 assets representing claims on or guaranteed by the central or regional governments, local authorities or public sector entities referred to in Article 10(1)(c).

Article 37 Transitional provision for securitisations backed by residential loans

1. By derogation from Article 13, securitisations issued before 1 October 2015, where the underlying exposures are residential loans as referred to in point (g)(i) of Article 13(2), shall qualify as Level 2B assets if they meet all the requirements set out in Article 13 other than the loan-to-value or loan-to-income requirements set out in that point (g)(i) of Article 13(2).

2. By derogation from Article 13, securitisations issued after 1 October 2015, where the underlying exposures are residential loans as referred to in point (g)(i) of Article 13(2) that do not meet the average loan-to-value or the loan-to-income requirements set out in that point, shall qualify as Level 2B assets until 1 October 2025, provided that the underlying exposures include residential loans that were not subject to a national law regulating loan-to-income limits at the time they were granted and such residential loans were granted at any time prior to 1 October 2015.

Article 38 Transitional provision for the introduction of the liquidity coverage ratio

1. In accordance with Article 460(2) of Regulation (EU) No 575/2013, the liquidity coverage ratio laid down in Article 4 shall be introduced as follows:

(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.

2. In accordance with Article 412(5) of Regulation (EU) No 575/2013, Member States or competent authorities may require domestically authorised credit institutions or a subset of such credit institutions to maintain a higher liquidity coverage requirement up to 100 % until the binding minimum standard is fully introduced at a rate of 100 % in accordance with this Regulation.

Article 39 Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

It shall apply from 1 October 2015.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 10 October 2014.

For the Commission

The President

José Manuel Barroso