Liquid assets under CRR/LCR

The primary question is how to consider the relation between CRR and LCR, i.e. shall the liquid assets under LCR be interpreted in accordance with the liquid assets definition under CRR? Provided that the answer is positive, how does this affect a see-through of a CIU that only partially consists of assets that are liquid under CRR? Under said circumstances, is there a risk that the non-liquid assets will contaminate the CIU as a whole, or is it possible that the share of the assets that is liquid can be covered by the LCR?

According to Commission Delegated Regulation (EU) 2015/61 of 10.10.2014 to supplement REGULATION (EU) 575/2013 with regard to liquidity coverage requirement for Credit Institutions, Article 15, shares or units in CIUs shall qualify as liquid assets of the same level as the liquid assets underlying the relevant undertaking up to an absolute amount of EUR 500 million (or equivalent amount in domestic currency) for each credit institution on an individual basis, provided that the requirements in Article 132(3) of Regulation (EU) No 575/2013 are complied with, and the CIU invests only in liquid assets and derivatives, in the latter case only to the extent necessary to mitigate interest rate, currency or credit risk in the portfolio. According to Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (henceforth “CRR”), Article 416(6), shares or units in CIUs may be treated as liquid assets up to an absolute amount of EUR 500 million in the portfolio of liquid assets of each institution provided that the requirements in Article 132(3) are met and that the CIU, apart from derivatives to mitigate interest rate or credit or currency risk, only invests in liquid assets as referred to in Article 416(1). According to paragraph 1 in said Article, institutions shall report the following as liquid assets: (a) cash and exposures to central banks to the extent that these exposures can be withdrawn at any time in times of stress. As regards deposits held with central banks, the competent authority and the central bank shall aim at reaching a common understanding regarding the extent to which minimum reserves can be withdrawn in times of stress; (b) other transferable assets that are of extremely high liquidity and credit quality; (c) transferable assets representing claims on or guaranteed by: (i) the central government of a Member State, a region with fiscal autonomy to raise and collect taxes, or of a third country in the domestic currency of the central or regional government, if the institution incurs a liquidity risk in that Member State or third country that it covers by holding those liquid assets; (ii) central banks and non-central government public sector entities in the domestic currency of the central bank and the public sector entity; (iii) the Bank for International Settlements, the International Monetary Fund, the Commission and multilateral development banks; (iv) the European Financial Stability Facility and the European Stability Mechanism; (d) transferable assets that are of high liquidity and credit quality; (e) standby credit facilities granted by central banks within the scope of monetary policy to the extent that these facilities are not collateralised by liquid assets and excluding emergency liquidity assistance.