28 March 2014
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on additional collateral outflows. These final draft RTS aim at strengthening resilience against liquidity risk in the EU banking sector and will be part of the EU Single Rulebook aimed at enhancing regulatory harmonisation across the sector.
These RTS aim at specifying methods to determine additional collateral outflows stemming from the impact of an adverse market scenario on an institution's derivatives positions, financing transactions and other contracts, if material. In particular, they focus on capturing adverse changes in market valuation of derivatives and similar transactions and contracts that require collateral.
These RTS include two methods to determine the additional collateral outflows: (i) the historical look-back approach (HLBA) and (ii) the advanced method for additional outflows (AMAO). The HLBA will serve as an obligatory floor to capture minimum additional collateral outflows and is to be implemented by all institutions regardless of whether they adopt the AMAO method or not.
These final RTS and ITS have been developed in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 (CRR) on prudential requirements for credit institutions and investment firms.
The final standards have been sent today to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.