EBA · 2014_987 Final Q&A

LCR inflows/outflows for collateralised stock borrow/lend transactions within 30 day window

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
423, para. 4
Topic
Supervisory reporting - Liquidity (LCR, NSFR, AMM)
Submitted by
Credit institution
Submitted
2014-03-24
Answered
2015-07-31
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

The LCR reporting templates for Outflows (C52) and Inflows (C53) do not include a section which allows firms to separate reverse-repo and other secured lending/borrowing transactions between those where collateral is re-hypothecated and those where collateral is not re-hypothecated, to cover the reporting institutions outright short positions. How should firms with matched book, fully collateralised stock borrow/stock lend transactions (which mature within 30 days) segregate these transactions from unmatched repo/reverse-repo transactions? The Basel III templates allow a 0% outflow/inflow in such cases (lines 289-295 and 264 of the Basel III implementation monitoring workbook), when the transaction matures in less than 30 days.

Background

The templates for the Basel III LCR include a separate section to allow firms to disclose reverse-repo transactions where collateral has been re-hypothecated. The templates allow a 0% inflow in such cases (lines 289-295 of the Basel III implementation monitoring workbook). The template also includes a separate line for “Bank outright short positions covered by a collateralised securities financing transaction” (line 264), which are given a 0% outflow. The relevant paragraphs for consideration from the Basel III document “The Liquidity Coverage Ratio and liquidity risk monitoring tools” (BCBS238) are 146 and 147.

Answer

In contrast to the Basel liquidity framework (Para 146, 147, 148) the Regulation (EU) No. 575/2013 (CRR) does not specify cases where the collateral obtained through reverse repo, securities borrowing or collateral swaps is re-used (i.e.,rehypothecated). Therefore the general treatment defined by the CRR for these transactions taken separately (repo, reverse repo, collateral swaps, short positions) should apply for these transactions, even if they are matched. Please refer to QA 2013-189 and QA2014-781 for additional information on the reporting of short positions and to QA 2013-274 for additional information on the reporting of repo and reverse repo transactions.

Original source: European Banking Authority, Q&A ID 2014_987

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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