Treatment of tax accounts

In order to qualify as liquid assets, general requirements for liquid assets and operational requirements according to Article 7 and 8 of the Delegated Regulation (EU) 2015/61 (LCR DA) must be fulfilled. A surplus on a tax account does not fulfil the general and operational requirements and therefore does not qualify as liquid assets. Article 7(2) of the LCR DA stipulates that liquid assets must be legally and practically available at any time the following 30 calendar days. Article 8(2) of the LCR DA stipulates that credit institutions shall have ready access to their holdings of liquid assets and be able to monetise them at any time during the 30 calendar day stress period via outright sale or repurchase agreement on generally accepted repurchase markets. 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. In addition, Article 8(3)(b) of the LCR DA states that, unless the liquid assets are placed in a separate pool directly under the control of the liquidity management function, internal systems and controls must be put in place to give the liquidity management function effective operational control to monetise the holdings of liquid assets at any point in the 30 calendar day stress period as well as to access the contingent funds without directly conflicting with any existing business or risk management strategies. Although a surplus on a tax account can quickly be withdrawn at a given time, it is reasonable to assume that the institution might prioritise the use of those monies and keep them for the fulfilment of potential tax obligations in the near future. Accordingly, a surplus on a tax account does not fulfil the general requirements in this case as it is subject to restrictions that hinder the institution from using it as part of the liquidity buffer. A surplus on a tax account is treated as an exposure towards the central government in accordance to Article 10(1)(c) of the Delegated Regulation (EU) 2015/61 and subject to Articles 7(5) and 7(6). Article 7(6) of the Delegated Regulation (EU) 2015/61 states, that assets shall be listed on a recognised exchange or tradeable via active outright sale or via simple repurchase transactions on generally accepted repurchase market. In this context, according to Article 7(5) of the Delegated Regulation (EU) 2015/61, the value of assets shall be determined by easily available market prices or calculated by an easy-to calculate formula that uses publicly available inputs. A surplus on a tax account is neither tradeable nor listed on a recognized exchange and cannot be included in HQLA.