EBA · 2013_563 Final Q&A

Outflows from credit and liquidity facilities

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
424, para. 3
Topic
Liquidity risk
Submitted by
Credit institution
Submitted
2013-11-26
Answered
2014-06-27
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Please confirm the interpretation that a general working capital facility made available to a client meets the condition detailed in Article 424(3)(c) of Regulation (EU) No 575/2013 (CRR) if the client can use the facility in situations where the client is unable to obtain its funding requirements in the financial markets provided that the facility has not been expressly and solely provided for this purpose.

Background

Working capital facilities are an important source of support to customers in the financing of their cash flow requirements. Where such a facility is made available for general working capital purposes, and does not therefore detail a specific purpose, it is our understanding that such a facility will meet the condition set out in Article 424(3)(c) even though the facility might be used to replace funding that the client could not obtain from the financial markets.

Answer

A general working capital facility may, due to its nature, fulfil Article 424(3)(c) of Regulation (EU) No. 575/2013 (CRR) but cannot be included in Article 424(3) unless it fulfils the conditions set out in Article 424(3)(a) and (b). Nevertheless, if there is outstanding debt issued by the client of the general working capital facility maturing within a 30 day period that is backstopped by the facility for the purpose of refinancing a debt obligation, this amount is considered as a substitute financing facility. Therefore it cannot be included in Article 424(3)(c) of the CRR and thus it does not fulfil all the conditions in Article 424(3).  See also answer to Q&A 506 .

Original source: European Banking Authority, Q&A ID 2013_563

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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