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TITLE IIIU.K. LIQUIDITY OUTFLOWS AND INFLOWS

CHAPTER 1 U.K. Net Liquidity outflows

Article 20U.K.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.

[F1Article 21 U.K. Netting of derivatives transactions

1. Credit institutions shall calculate liquidity outflows and inflows expected over a 30 calendar day period, for the contracts listed in Annex II to Regulation (EU) No 575/2013 and for credit derivatives, on a net basis by counterparty subject to the existence of bilateral netting agreements meeting the conditions laid down in Article 295 of that Regulation.

2. By way of derogation from paragraph 1, credit institutions shall calculate 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) on a net basis, even where those transactions are not covered by a bilateral netting agreement.

3. For the purposes of this Article, net basis shall be considered to be net of collateral to be posted or received in the next 30 calendar days. However, in the case of collateral to be received in the next 30 calendar days, net basis shall be considered to be net of that collateral only if both of the following conditions are met:

(a) the collateral, when received, will qualify as a liquid asset under Title II of this Regulation;

(b) the credit institution will be legally entitled and operationally able to reuse the collateral, when received.]

Textual Amendments

CHAPTER 2 U.K. Liquidity outflows

Article 22U.K.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:

[F1(a) the current outstanding amount for stable retail deposits and other retail deposits determined in accordance with Articles 24 and 25;

(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, 28 and 31a;]

(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.

[F23. The calculation of liquidity outflows in accordance with paragraph 1 shall be subject to any netting of interdependent inflows that is approved under Article 26.]

Textual Amendments

Article 23U.K.Additional liquidity outflows for other products and services

[F11.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 31a 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:

(a)other off-balance-sheet and contingent funding obligations, including 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 the renewal of existing retail or wholesale loans or the extension of new retail or wholesale loans;

(g)derivative payables, other than the contracts listed in Annex II to Regulation (EU) No 575/2013 and credit derivatives;

(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.

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Textual Amendments

Article 24U.K.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 [F4the UK deposit guarantee scheme] 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 [F5the UK deposit guarantee scheme].

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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.

Textual Amendments

Article 25U.K.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;

[F1(b)the deposit is an internet access-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 [F7United Kingdom], the depositor is resident in a third country or the deposit is denominated in a currency other than [F8pounds sterling]. 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.

Textual Amendments

Article 26U.K.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 [F9the United Kingdom].

[F2Competent authorities shall inform the EBA which institutions benefit from the netting of outflows with interdependent inflows under this article. The EBA may request supporting documentation.]

Textual Amendments

Article 27U.K.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;

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(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 [F11the UK deposit guarantee scheme] or an equivalent deposit guarantee scheme in a third country.

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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.

Textual Amendments

Article 28U.K.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 [F13the UK deposit guarantee scheme] 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 %.

[F13.Credit institutions shall multiply liabilities maturing within 30 calendar days and resulting from secured lending or capital market-driven transactions, as defined in points (2) and (3) respectively of Article 192 of Regulation (EU) No 575/2013, by:

(a)0 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 10 of this Regulation as liquid assets of any of the categories of level 1 asset referred to in Article 10, with the exception of extremely high quality covered bonds referred to in point (f) of Article 10(1);

(b)7 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 10 of this Regulation as liquid assets of the category referred to in point (f) of Article 10(1);

(c)15 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 11 of this Regulation as liquid assets of any of the categories of level 2A asset referred to in Article 11;

F14(d)25 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 13 of this Regulation as liquid assets of any of the categories of level 2B asset referred to in point (i), (ii) or (iv) of point (g) of Article 13(2);

(e)30 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 12 of this Regulation as liquid assets of the category of level 2B asset referred to in point (e) of Article 12(1);

(f)35 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 13 of this Regulation as liquid assets of any of the categories of level 2B asset referred to in point (iii) or (v) of point (g) of Article 13(2);

(g)50 % where they are collateralised by assets that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 12 of this Regulation as liquid assets of any of the categories of level 2B asset referred to in point (b), (c) or (f) of Article 12(1);

(h)the percentage minimum haircut determined in accordance with paragraphs (2) and (3) of Article 15 of this Regulation where they are collateralised by shares or units in CIUs that, but for being used as collateral for those transactions, would qualify in accordance with Articles 7 and 15 as liquid assets of the same level as the underlying liquid assets;

(i)100 % where they are collateralised by assets that do not fall within any of points (a) to (h) of this subparagraph.

By way of derogation from the first subparagraph, where the counterparty to the secured lending or capital market-driven transaction is the domestic central bank of the credit institution, the outflow rate shall be 0 %. However, in cases where the transaction is done through a branch with the central bank of the Member State or of the third country in which the branch is located, a 0 % outflow rate shall be applied only if the branch has the same access to central bank liquidity, including during stress periods, as credit institutions incorporated in that Member State or third country have.

By way of derogation from the first subparagraph, for secured lending or capital market-driven transactions that would require an outflow rate under that first subparagraph higher than 25 %, the outflow rate shall be 25 % where the counterparty to the transaction is an eligible counterparty.

4.Collateral swaps, and other transactions with a similar form, that mature within the next 30 calendar days shall lead to an outflow where the asset borrowed is subject to a lower haircut under Chapter 2 than the asset lent. The outflow shall be calculated by multiplying the market value of the asset borrowed by the difference between the outflow rate applicable to the asset lent and the outflow rate applicable to the asset borrowed determined in accordance with the rates specified in paragraph 3. For the purposes of this calculation, a 100 % haircut shall be applied to assets that do not qualify as liquid assets.

By way of derogation from the first subparagraph, where the counterparty to the collateral swap or other transaction with a similar form is the domestic central bank of the credit institution, the outflow rate to be applied to the market value of the asset borrowed shall be 0 %. However, in cases where the transaction is done through a branch with the central bank of the Member State or of the third country in which the branch is located, a 0 % outflow rate shall be applied only if the branch has the same access to central bank liquidity, including during stress periods, as credit institutions incorporated in that Member State or third country have.

By way of derogation from the first subparagraph, for collateral swaps or other transactions with a similar form that would require an outflow rate higher than 25 % under that first subparagraph, the outflow rate to be applied to the market value of the asset borrowed shall be 25 % where the counterparty is an eligible counterparty.]

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.

[F27.Assets borrowed on an unsecured basis and maturing within the next 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 assets borrowed and the assets borrowed do not form part of the credit institution's liquidity buffer.

8.For the purposes of this Article, ‘domestic central bank’ means any of the following:

(a)any Eurosystem central bank where the credit institution's home Member State has adopted the Euro as its currency;

(b)the national central bank of the credit institution's home Member State where that Member State has not adopted the Euro as its currency;

(c)the central bank of the third country in which the credit institution is incorporated.

9.For the purposes of this Article, ‘eligible counterparty’ means any of the following:

(a)the central government, a public sector entity, a regional government or a local authority of the credit institution's home Member State;

(b)the central government, a public sector entity, a regional government or a local authority of the Member State or of the third country in which the credit institution is incorporated for the transactions undertaken by that credit institution;

(c)a multilateral development bank.

However, public sector entities, regional governments and local authorities shall only count as an eligible counterparty where they are assigned a risk weight of 20 % or lower in accordance with Article 115 or Article 116 of Regulation (EU) No 575/2013, as applicable.]

Textual Amendments

F14Art. 28(3)(d)(ii): by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 242(b) (with savings in S.I. 2019/680, reg. 11) it is provided (31.12.2020) that the words "United Kingdom" are substituted for "Member State".

Article 29U.K.Outflows within a group F15...

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 [F16common management relationship] F17...;

(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 [F18United Kingdom].

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Textual Amendments

Article 30U.K.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 %.

[F12.The credit institution shall calculate and notify to the competent authority 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 institution's credit quality, to additional liquidity outflows or collateral needs. The credit institution shall notify the competent authority of that outflow no later than the submission of the reporting in accordance with Article 415 of Regulation (EU) No 575/2013. Where the competent authority considers that outflow to be material in relation to the potential liquidity outflows of the credit institution, it 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 institution's credit quality corresponding to a downgrade in its external credit assessment of at least 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 that it has entered into and shall notify the result of its review to the competent authority.

F203.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 if material. This calculation shall be made in accordance with Commission Delegated Regulation (EU) 2017/208(1).

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

5.Where the credit institution has a short position that is covered by an unsecured security borrowing, the credit institution shall add an additional outflow corresponding to 100 % of the market value of the securities or other assets sold short, unless the terms upon which the credit institution has borrowed them require their return only after 30 calendar days. Where the short position is 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 will 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.

[F17.Deposits received as collateral shall not be considered as liabilities for the purposes of Article 24, 25, 27, 28 or 31a but shall be subject to the provisions of paragraphs 1 to 6 of this Article, where applicable. The amount of cash received exceeding the amount of cash received as collateral shall be treated as deposits in accordance with Article 24, 25, 27, 28 or 31a.]

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.

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[F112.In relation to the provision of prime brokerage services, where a credit institution has covered the short sales of a client by internally matching them with the assets of another client and the assets do not qualify as liquid assets, those transactions shall be subject to a 50 % outflow rate for the contingent obligation.]

Textual Amendments

F20Art. 30(3): by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 244 (with savings in S.I. 2019/680, reg. 11) it is provided (31.12.2020) that the words “technical standards made under” are substituted for “the delegated act to be adopted by the Commission pursuant to”.

Article 31U.K.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.

[F16.The undrawn committed amount of a liquidity facility that has been provided to an SSPE for the purpose of enabling that 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.]

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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 [F23the central or a regional government of the United Kingdom] 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.

[F1By way of derogation from point (g) of Article 32(3), 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 the credit institution acting as an intermediary. That inflow and outflow shall be calculated by applying to the undrawn committed credit or liquidity facility received and extended the rate that is applicable to that facility by virtue of the first subparagraph of this paragraph and respecting the conditions and requirements otherwise imposed in relation to it by this paragraph.]

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 [F24the public policy objectives of the central or a regional government of the United Kingdom]. 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.

F2110.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F2Article 31a U.K. Outflows from liabilities and commitments not covered by other provisions of this Chapter

1. Credit institutions shall multiply by a 100 % outflow rate any liabilities that become due within 30 calendar days, except for the liabilities referred to in Articles 24 to 31.

2. Where the total of all contractual commitments to extend funding to non-financial customers within 30 calendar days, other than commitments referred to in Articles 24 to 31, exceeds the amount of inflows from those non-financial customers calculated in accordance with point (a) of Article 32(3), the excess shall be subject to a 100 % outflow rate. For the purposes of this paragraph, non-financial customers shall include, but not be limited to, natural persons, SMEs, corporates, sovereigns, multilateral development banks and public sector entities, and shall exclude financial customers and central banks.]

Textual Amendments

CHAPTER 3 U.K. Liquidity inflows

Article 32U.K.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.

[F12.Credit institutions shall apply a 100 % inflow rate to inflows referred to in paragraph 1, including in particular the following inflows:

(a)monies due from central banks and financial customers with a residual maturity of no more than 30 calendar days;

(b)monies due from 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 no more than 30 calendar days;

(c)monies due from securities maturing within 30 calendar days;

(d)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 those major indexes and cash due from those equity instruments sold but not yet settled, if they are not recognised as liquid assets in accordance with Title II.

3.By way of 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 with a residual maturity of no more than 30 calendar days, with the exception of monies due from those customers from trade finance transactions or maturing securities, shall be reduced for the purposes of principal payment by 50 % of their value. For the purposes of this point, the term ‘non-financial customers’ shall have the same meaning as in Article 31a(2). However, credit institutions acting as intermediaries that have received a commitment as referred to in the second subparagraph of Article 31(9) from a credit institution set up and sponsored by the central or regional government of at least one Member State 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 that 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) respectively of Article 192 of Regulation (EU) No 575/2013, with a residual maturity of no more than 30 calendar days shall be multiplied by:

(i)

0 % where they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 10 of this Regulation as liquid assets of any of the categories of level 1 asset referred to in Article 10, with the exception of extremely high quality covered bonds referred to in point (f) of Article 10(1);

(ii)

7 % where they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 10 of this Regulation as liquid assets of the category referred to in point (f) of Article 10(1);

(iii)

15 % where they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 11 of this Regulation as liquid assets of any of the categories of level 2A asset referred to in Article 11;

(iv)

25 % where they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 13 of this Regulation as liquid assets of any of the categories of level 2B asset referred to in point (i), (ii) or (iv) of point (g) of Article 13(2);

(v)

30 % where they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 12 of this Regulation as liquid assets of the category of level 2B asset referred to in point (e) of Article 12(1);

(vi)

35 % where they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 13 of this Regulation as liquid assets of any of the categories of level 2B asset referred to in point (iii) or (v) of point (g) of Article 13(2);

(vii)

50 % if they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 12 of this Regulation as liquid assets of any of the categories of level 2B asset referred to in point (b), (c) or (f) of Article 12(1);

(viii)

the percentage minimum haircut determined in accordance with paragraphs (2) and (3) of Article 15 of this Regulation if they are collateralised by assets that, whether or not they are re-used in another transaction, would qualify in accordance with Articles 7 and 15 as shares or units in CIUs of the same level as the underlying liquid assets;

(ix)

100 % where they are collateralised by assets that do not fall within any of points (i) to (viii) of this point.

However, no inflow shall be recognised where the collateral is used by the credit institution to cover a short position in accordance with the second sentence of Article 30(5);

(c)monies due from contractual margin loans maturing in the next 30 calendar days made against non-liquid assets collateral may receive a 50 % inflow rate. Those inflows may only be considered where 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 27F25... 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, and other transactions with a similar form that mature within 30 calendar days shall lead to an inflow where the asset lent is subject to a lower haircut under Chapter 2 than the asset borrowed. The inflow shall be calculated by multiplying the market value of the asset lent by the difference between the inflow rate applicable to the asset borrowed and the inflow rate applicable to the asset lent in accordance with the rates specified in point (b). For the purposes of this calculation, a 100 % haircut shall apply to assets that do not qualify as liquid assets;

(f)where the collateral obtained through reverse repos, securities borrowings, collateral swaps, or other transactions with a similar form, maturing within 30 calendar days is used to cover short positions that can be extended beyond 30 calendar days, the credit institution shall assume that such reverse repos, securities borrowings, collateral swaps or other transactions with a similar form will be rolled-over and will not give rise to any cash inflows reflecting the need to continue to cover the short position or to re-purchase the relevant securities. Short positions shall 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 in a matched book the credit institution has borrowed a security for a given period and lent the security out for a longer period;

(g)undrawn credit or liquidity facilities, including undrawn committed liquidity facilities from central banks, and other commitments received, other than those referred to in the second subparagraph of Article 31(9) and in Article 34, shall not be taken into account as an inflow;

(h)monies due from securities issued by the credit institution itself or by a SSPE with which the credit institution has close links 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 assets in accordance with this Article;

(i)loans 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 calendar 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.

[F15.Outflows and inflows expected over 30 calendar days from the contracts listed in Annex II to Regulation (EU) No 575/2013 and from credit derivatives shall be calculated on a net basis in accordance with Article 21 and shall be multiplied by a 100 % inflow rate 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.

Textual Amendments

Article 33U.K.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 [F26common management relationship];

(b)inflows from deposits placed with other credit institutions within a group of entities qualifying for the treatment set out in Article 113(6) F27... 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;

[F28(b)an activity that immediately before IP completion day would have amounted to consumer credit for the purposes of Directive 2008/48/EC.]

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.

F29... The [F30PRA must publish] and maintain a list of the specialised credit institutions exempted or subject to a higher cap. F31...

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

Textual Amendments

Article 34U.K.Inflows within a group F32...

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 [F33common management relationship] F34...;

(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 [F35United Kingdom].

F362.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F363.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

(1)

[F1Commission Delegated Regulation (EU) 2017/208 of 31 October 2016 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on an institution's derivatives transactions ( OJ L 33, 8.2.2017, p. 14 ).]

Textual Amendments