The proposed methodology is based on a scorecard, which aims at producing an ordinal ranking of assets by combining a set of different liquidity indicators.
In this paper, the EBA sets out, for discussion, the steps it intends to follow in performing its analysis. The first step will involve the assessment of a range of asset classes against the fundamental definitions of liquid assets included in the draft Capital Requirements Regulation (CRR). A detailed quantitative assessment of the liquidity of individual assets will then be performed, with the objective of producing a ranking of the relative liquidity of the different asset classes.
Finally, the analysis will identify the features that are of particular importance to market liquidity. The objective of this last step is to provide definitions of the characteristics assets should have to be qualified as highly, or extremely highly liquid.
The draft CRR text stipulates that the EU Commission will adopt a delegated act by 30 June 2014 to implement the LCR in EU regulation. The EBA is mandated to report in the second half of 2013 to the EU Commission on appropriate uniform definitions of high and of extremely high liquidity and credit quality of transferable assets and appropriate haircuts.
The discussion paper takes into account the latest developments regarding the LCR and liquid assets requirements, both at international and European levels.
The consultation runs until 21 March 2013.
Full discussion paper
© EBA
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