LCR treatment of deposits received as collateral

Should deposit received as collateral for a facility, in the case where a credit institution’s client has an option for early termination of this facility, which could lead to an outflow of the collateral during the next 30 calendar days, be assigned an additional outflow corresponding to 100% in accordance with Article 30(6) of Delegated Regulation (UE) 2015/61?

In accordance with Article 30(7) of Delegated Regulation (UE) 2015/61 deposits received as collateral should not be treated as liabilities for the purposes of Article 24, 25, 27, 28 or 31a but shall be subject to the provisions of paragraphs 1 to 6 of Article 30, where applicable. In our view deposits received as collateral in principal fall under letters (a) and (b) of Article 30(6) of Delegated Regulation (UE) 2015/61, according to which the credit institution shall add an additional outflow corresponding to 100 % of: (a) the excess collateral the credit institution holds that can be contractually called at any times by the counterparty; (b) collateral that is due to be posted to a counterparty within 30 calendar days (c) (…)’. The amount of deposit exceeding collateral the credit institution holds that can be called at any times by the counterparty would fall under Article 30(6)(a) of Delegated Regulation (UE) 2015/61. The amount of deposit which becomes due during the next 30 calendar days because of the contractual maturity of the facility would fall under Article 30(6)(b) of Delegated Regulation (UE) 2015/61. There remains a situation in which the amount of deposit could fall due during the next 30 calendar days if a client utilizes  the option for early termination of the facility.