On 4 October 2018, the European Banking Authority (EBA) published a report on liquidity measures under Article 509(1) of the Capital Requirements Regulation (CRR).
As part of its mandate under the CRR, the EBA monitors and evaluates the liquidity coverage requirements on an annual basis. In this regard, the EBA takes into account the potential impact of these requirements on the business and risk profiles of banks, on the stability of financial markets, on the economy and on the stability of the supply of bank lending. After consulting relevant stakeholders, the EBA is mandated to communicate a report on its findings to the European Commission. The European Parliament and the Council shall be given the opportunity to state their views on the EBA report. The report now published is the EBA’s fifth report under Article 509(1) of the CRR and the third publication since the introduction of the minimum liquidity coverage standards in 2015.
Key findings in the report include:
- on average, the liquidity coverage ratio (LCR) is well above the minimum requirements (both the minimum requirement of 80% in the interim phase and the minimum requirement of 100% under full implementation) and is increasing, driven by high quality liquid asset investment;
- level 1 assets (excluding covered bonds) form a large part of the liquidity buffer;
- outflows are 16% of total assets. Non-operational deposits continue to be the main component of banks’ outflows. Inflows are more than 5% of total assets; and
banks finance their assets in different currencies. LCR levels considering items denominated exclusively in US dollars are, in general, lower