EBA · 2022_6574 Rejected question

Encumbrance of assets

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
509
Topic
Liquidity risk
Submitted by
Credit institution
Submitted
2022-09-05
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Question

If the reporting institution has a HQLA pledged as collateral for a punctual transaction without any additional liquidity movement (no cash leg) for two days on the reporting date, should this asset be considered buffer as it will be unencumbered within the following 30 calendar days even if in the reporting date it is encumbered? should it be reported as inflow for two days and then as buffer?

Background

The delegated act stablishes:  an asset shall be deemed to be unencumbered where the credit institution is not subject to any legal, contractual, regulatory or other restriction preventing it from liquidating, selling, transferring, assigning or, generally, disposing of such asset via active outright sale or repurchase agreement within the following 30 calendar days.  The cap on the liquidity buffer is calculated taking into account the unwind of the repos, but in the presented case there is no cash leg associated with the operation and it will only be pledged for two days, should this asset be considered as part of the liquidity as it is unencumbered withing the following 30 calendar days? inflow for two days until it is "free"?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2022_6574

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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