Commission Delegated Regulation amending liquidity coverage ratio

On 30 October 2018 the Commission Delegated Regulation (EU) 2018/1620 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 was published in the Official Journal of the European Union. The amendment has a few objectives, mainly the following ones.

1. In order to take adequate account of activities carried out by credit institutions active outside the Union, any requirement for a minimum issue size applying to liquid assets held by a subsidiary undertaking in a third country should be waived, so that such assets can be recognised for consolidation purposes. Otherwise, the parent institution could suffer a shortfall in liquid assets at consolidated level since the liquidity requirement arising from a subsidiary in a third country would be included in the consolidated liquidity requirement.
2. Reserves held by a third country subsidiary or branch of a Union credit institution in the central bank of a third country which is not assigned a credit assessment of credit quality step 1 by a nominated external credit assessment institution should be eligible as level 1 liquid assets where certain conditions are met.
3. The Regulation (EU) 2017/2402 of the European Parliament and of the Council containing criteria to determine whether a securitisation can be designated as a simple, transparent and standardised (‘STS’) securitisation is to be taken into account in determining the high quality liquid assets for the calculation of the liquidity coverage requirement.
4. The liquidity regulation should not hinder effective transmission of monetary policy to the economy. Therefore, the competent authorities should have the possibility to waive the unwind mechanism for the calculation of the liquidity buffer in the case of secured transactions with the ECB or the central bank of a Member State under certain conditions.