Commission Delegated Regulation (EU) 2015/61Show full title

TITLE I U.K. THE LIQUIDITY COVERAGE RATIO

Article 1 U.K. 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 U.K. 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:

[F1 (a) third country assets held by a subsidiary undertaking in a third country may be recognised as liquid assets for consolidation purposes where they qualify as liquid assets under that third country's national law setting out the liquidity coverage requirement and they satisfy one of the following conditions:

(i)

the assets meet all the requirements laid down in Title II of this Regulation;

(ii)

the assets fail to meet the specific requirement laid down in Title II of this Regulation with respect to their issue size but meet all the other requirements laid down therein.

The assets recognisable by virtue of point (ii) may only be recognised up to the amount of the stressed net liquidity outflows incurred in the particular currency in which they are denominated and arising from that same subsidiary undertaking;]

(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.

Textual Amendments

F1 Substituted by Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018 amending Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (Text with EEA relevance).

Article 3 U.K. 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)

[F2 . . . . .

(9)

. . . . .]

(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)

[F1 ‘ stress ’ means 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 is 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.

Textual Amendments

F1 Substituted by Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018 amending Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (Text with EEA relevance).

F2 Deleted by Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018 amending Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (Text with EEA relevance).

Article 4 U.K. 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).

[F1 5. Credit institutions shall calculate and monitor their liquidity coverage ratio in the reporting currency for all items, irrespective of their actual currency denomination.

In addition, credit institutions shall separately calculate and monitor their liquidity coverage ratio for certain items as follows:

(a) for items that are subject to separate reporting in a currency other than the reporting currency in accordance with Article 415(2) of Regulation (EU) No 575/2013, credit institutions shall separately calculate and monitor their liquidity coverage ratio in that other currency;

(b) for items denominated in the reporting currency where the aggregate amount of liabilities denominated in currencies other than the reporting currency equals or exceeds 5 % of the credit institution's total liabilities, excluding regulatory capital and off-balance-sheet items, credit institutions shall separately calculate and monitor their liquidity coverage ratio in the reporting currency.

Credit institutions shall report to their competent authority the liquidity coverage ratio in accordance with Commission Implementing Regulation (EU) No 680/2014.]

[F3 6. Credit institutions shall not double-count liquid assets, inflows and outflows.]

Textual Amendments

F1 Substituted by Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018 amending Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (Text with EEA relevance).

F3 Inserted by Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018 amending Delegated Regulation (EU) 2015/61 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for credit institutions (Text with EEA relevance).

Article 5 U.K. 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.

(1)

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).

(2)

Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).

(3)

Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, p. 1).