EBA · 2019_4596 Rejected question

Ready access to bonds giving natural hedging to the banking book

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
425
Topic
Liquidity risk
Submitted by
Individual
Submitted
2019-03-06

Question

Can HQLA assets whose sale would result in a breach of internal limits for IRRBB be considered as free and readily accessible under Article 8 of Commission Delegated Regulation (EU) 2015/61?

Background

The interest rate risk for the banking book portfolio (IRRBB) is usually managed globally, inside defined limits, including both assets and liabilities. Some of these assets are the HQLAs. Should these assets be considered free and readily accessible, if their sale would make the institution incur an internal limits' breach for IRRBB? Article 8 stands clearly that " A liquid asset shall be deemed readily accessible to a credit institution where there are no legal or practical impediments to the credit institution's ability to monetise such an asset in a timely fashion." Additionally, Q&A 2015_2542 , which relates market with liquidity risk, reinforces the idea that " the bank must ensure that the potential liquidation of the asset will not conflict with any internal business or risk management strategies. The liquidation of the asset must not lead to a breach of internal limits on open risk positions. " In this context, does selling some of the portfolio's assets could be considered a decision that, when breaching internal limits', has a practical impediment?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2019_4596

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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