11 February 2015

EBF response to EBA consultation on draft ITS amending ITS on supervisory reporting on LCR

The European Banking Federation (EBF) provides its comments to the European Banking Authority  (EBA) consultation on draft ITS amending ITS on supervisory reporting on Liquidity Coverage Ratio (EBA/CP/2014/45).

The EBF hopes that inconsistencies will be fixed very soon so that the final ITS on LCR is made consistent with those modifications to the DA. These inconsistencies relate to the definition of trade finance, the asymmetrical treatment of repos and reverse repos, the liquidity reserves in Central Banks which are not meeting the Credit Quality Step 1 requirement and are not recognised as Liquid Assets, and the definition of SMEs.

For sake of clarity and to avoid misalignment between the DA and the ITS, the EBF strongly recommends that the ITS instructions systematically refer to the Article and exact wording of the DA. The draft ITS contains several instances of such misalignments that make the reporting and the LCR uncertain. Instructions should only complement, but not change the DA. So as to cope with any potential misalignment between the ITS instructions and the DA, the EBF recommends that it is made clear that DA prevails over the ITS instructions (i.e. make the hierarchy of texts clear).

Seemingly, to the extent that there would be some remaining interpretation issues, the Question and Answer (Q&A) process may be helpful. However, the Q&A process should be handled carefully to make sure that the EBA’s proposals for interpretations do not create more uncertainty by not considering all the ramifications of its proposals (as there are numerous connections between different LCR assumptions). Additionally, EBF recommends that EBA’s proposals for interpretations are accompanied with the basis for conclusions, articulating them and the ramifications and connections on other LCR assumptions.

Though it is mentioned in 5.1 of the CP (“LCR calculation tool”) that the tool will not be part of the final ITS, EBF recommends that the final calculation tool is made available to the banking industry reflecting all the amendments made during the consultation phase. This will contribute to a better and more harmonised implementation by credit institutions.

EBF has noted that the draft ITS does not refer to DA-Art.2(3) that mentions that in some circumstances, locally applicable LCR’s percentages and/or liquid assets’ eligibility criteria should be factored in the DA LCR. EBF would welcome clarification on which cells and how the values of those cells should be filled in.

Full response

© EBF