EBA · 2014_792 Final Q&A

Securities borrowing transactions within the LCR - inflows

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
425, para. 2
Topic
Liquidity risk
Submitted by
Competent authority
Submitted
2014-01-29
Answered
2014-07-11
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

How should to treat potential inflows regarding an unsecured securities borrowing transaction as they are not mentioned within Article 425 (2) of Regulation (EU) No 575/2013 (CRR) be treated.

Background

An institution has lent government bonds by way of an unsecured securities borrowing transaction. As the bonds are not available at the reporting date and therfore don´t fulfill the restrictions laid down in Art. 417 b) CRR they do not qualify as HQLA. But the bank has the right to terminate the securities borrowing transaction an a dayly basis and could get the bonds back within three days.

Answer

In accordance with Article 425(2) of Regulation (EU) No 575/2013 (CRR), institutions shall report in full only contractual inflows from outstanding exposures that are not past due and for which the institution has no reason to expect non-performance measured over the next 30 days. Thus, securities lent via unsecured securities borrowing transaction can be reported as inflows only if they have been contractually recalled and due within the next 30 days, and only if they are eligible to the stock of liquid assets in accordance with Article 416 of the CRR. These recalled securities shall be reported up to their market value net of haircuts prudently valued according to Article 418 of the CRR.

Original source: European Banking Authority, Q&A ID 2014_792

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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