LCR treatment of settled-to-market derivatives

In accordance with Article 30(3) of Delegated Regulation (EU) 2015/61 as amended by Delegated Regulation (EU) 2018/1620 (hereinafter ‘LCR DR’), credit institutions shall add an additional outflow corresponding to collateral needs that would result from the impact of an adverse market scenario on the credit institution's derivatives transactions, financing transactions and other contracts if material. The calculation of this additional outflow is further specified in Delegated Regulation (EU) 2017/208. In accordance with Article 2(1) of this Regulation, the additional outflow, to the extent it is material and to be considered in the LCR, shall be the largest absolute net 30-day collateral flow realised during the 24 months preceding the date of calculation of the LCR.   While derivatives structured as "settled-to-market (STM) do not include a transfer of collateral, the economic cash flows exchanged between parties in relation to STM and non-STM derivatives are identical and therefore the collateral flows referred to in Article 2(1) of Delegated Regulation (EU) 2017/208 should be understood as also capturing payments and receipts which are deemed to settle outstanding exposures from derivatives structured as STM.