EBA · 2019_4872 Final Q&A

Unutilised Limits of Guarantess

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
389
Topic
Liquidity risk
Submitted by
Credit institution
Submitted
2019-08-14
Answered
2022-02-11
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Are the unutilised limits of guarantees to be included in LCR {C73,r870,c010}?

Background

As per Article 23 LCR DR, 'Contingent outflows due to triggers other than downgrade triggers referred to in Article 30(2) LCR DR are to be included in LCR {C73,r870,c010}. The bank currently has allocated limits to its customers specifying the maximum amount of outstanding guarantess they can have at any given point in time. Do the unutilised limits of guarantees meet the definition specified above implying that they should be included in LCR {C73,r870,c010}?

Answer

The unused part of a guarantee granted by a bank in the context of import/export transactions should be considered under point h) of Article 23(1) LCR DR as trade finance off-balance sheet related products. Accordingly, credit institutions shall assess the likelihood and potential volume of outflows to compute in the LCR stemming from these products. In any case, even if they are considered material following Article 23(2), their outflow rate should not exceed 5%. These transactions should be reported under row 860 of C 73.00 – Outflows of Annex XXIV of the ITS on Supervisory Reporting Regulation (EU) 2021/451”.

Original source: European Banking Authority, Q&A ID 2019_4872

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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