EBA · 2015_2001 Final Q&A

Credit risk - standardised approach

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
134, para. 3
Topic
Credit risk
Submitted by
Competent authority
Submitted
2015-05-11
Answered
2015-11-13
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Can cash equivalents be assigned a Risk weight of 0%? What is the definition of an equivalent cash item?

Background

Question raised to ECB Methodology and Standards Development Division.

Answer

The term "equivalent" in Article 134 (3) of Regulation (EU) No 575/2013 (CRR) does not refer to alternatives to "cash items" but to alternatives to "cash in hand". Cash in hand, as defined by Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions, Annex V, Part 2, Point 1 (Instructions on Balance Sheet, Assets), includes holdings of national and foreign banknotes and coins in circulation that are commonly used to make payments. The 0% risk weight is solely applicable to cash items but not to "cash equivalents". The applicability of the 0% risk weight is, however, not limited to cash in hand but extends to other forms of cash items different from deposits, on the balance sheet of the institution under the applicable accounting framework. Balances in local currency held on current accounts of the respective central bank should be treated according to Article 114. Please also see Q&A 180 .

Original source: European Banking Authority, Q&A ID 2015_2001

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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