EU Amending Legislation Published for Liquidity Coverage Requirement

An Amending Regulation supplementing the Capital Requirements Regulation has been published in the Official Journal of the European Union, following its adoption in July 2018 by the European Commission. The Amending Regulation, which relates to the Liquidity Coverage Requirement for credit institutions, makes changes to the existing Delegated Regulation on the LCR with the objective of improving its practical application. The existing Delegated Regulation sets out detailed requirements on the LCR and specifies which assets are to be considered as liquid (so-called high quality liquid assets) and how the expected cash outflows and inflows over a 30-day stressed period are to be calculated.

The Amending Regulation makes the following changes:

• full alignment of the calculation of the expected liquidity outflows and inflows on repurchase agreements, reverse repurchase agreements and collateral swaps transactions with the international liquidity standard developed by the Basel Committee on Banking Supervision;
• treatment of certain reserves held with third-country central banks;
• waiver of the minimum issue size for certain non-EU liquid assets;
• the application of the unwind mechanism for the calculation of the liquidity buffer; and
• integration in the existing Delegated Regulation of the new criteria for simple, transparent and standardized securitizations.

The Amending Regulation will enter into force on November 19, 2018 and will apply directly across the EU from April 30, 2020.

View the Amending Regulation.