22 October 2013

EBA consults on draft technical standards related to liquidity requirements

In particular, the EBA will be consulting on

1. draft ITS on currencies for which the justified demand for liquid assets exceeds their availability;
2. draft RTS on derogations for eligible currencies; and
3. draft ITS listing the currencies with an extremely narrow definition of central bank eligibility. All three consultations will run until 22 December 2013.

Key features of the three draft technical standards

The draft implementing technical standard (ITS) on currencies for which the justified demand for liquid assets exceeds their availability aim at drawing a list of currencies featuring constraints on the availability of liquid assets. The list has been compiled on the basis of data gathered by Member States. In particular, the data collection has been completed for two currencies: the Norwegian krone (NOK) and the Danish krone (DKK). This list of currencies with constraints will be revised once a final definition of liquid assets is available at EU level.

The draft regulatory technical standards (RTS) on derogations for eligible currencies aim at specifying the derogations that could be applied to those currencies facing constraints on the availability of liquid assets. These standards aim to address the inherent difficulties that institutions would face in meeting their liquidity coverage requirement even in spite of a sound liquidity management. Although the RTS try to discourage, to the extent possible, the use of derogations, these may have to be applied in those circumstances where an institution can prove that, despite all mitigating actions undertaken, the need for liquid assets remains. Institutions willing to apply such derogations will, amongst other conditions, have to notify competent authorities and to provide detailed information 30 days prior to the initial use of the derogation.

The draft implementing technical standards (ITS) on currencies with an extremely narrow definition of central bank eligibility aim at drawing a list of currencies in which only central government debt or debt issued by the central bank is eligible as collateral for standard liquidity operations at the central bank. Based on this definition, as well as on the information provided by Member States, only the Bulgarian leva appears to have extremely narrow central bank eligibility.

Comments can be sent to the EBA by 22 December, 2013. A public hearing for the three consultations will take place at the EBA premises on 19 November from 14:00 to 17:00 UK time.

Press release

Consultation EBA/CP/2013/37 - draft ITS on currencies with an extremely narrow definition of central bank eligibility

Consultation EBA/CP/2013/38 - draft ITS on currencies for which the justified demand for liquid assets exceeds the availability of those assets under Article 419(4) of CRR 

Consultation EBA/CP/2013/39 - draft RTS on derogations for currencies with constraints on the availability of liquid assets

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