The European Banking Authority (EBA) issued its final draft Regulatory Technical Standards (RTS) on criteria for the application of a preferential treatment in cross-border intragroup credit or liquidity lines, or within an IPS. These RTS further specify the additional criteria listed in the in the context of the liquidity coverage ratio (LCR) Delegated Act for the application of the preferential treatment.
Under the new RTS, a low liquidity risk profile of the liquidity provider and receiver required in the LCR Delegated Act will be determined on the basis of its compliance with the LCR and the Pillar 2 requirements, as well as on the basis of the outcome of the latest supervisory review and evaluation process.
Credit institutions' management bodies will be required to submit a written and reasoned legal opinion certifying that the credit or liquidity line in the LCR Delegated Act is a committed line legally and practically available at any time.
The line is also subject to other requirements such as currency denomination or maturity date, so as to reinforce the appropriateness of the line for the application of the preferential treatment.
Regarding the requirement in the LCR Delegated Act to take into account the liquidity risk profile of the liquidity receiver in the liquidity risk management plans of the liquidity provider, the liquidity provider shall monitor and oversee the liquidity position of the receiver on a daily basis. The contingency funding plan of the liquidity provider shall ensure that from this monitoring the liquidity support to the receiver is guaranteed even in times of stress.
Article 29 (2) and Article 34 (2) of the LCR Delegated Act set out the additional objective criteria that have to be fulfilled for the application of preferential inflow and outflow rates in the context of cross-border intragroup credit or liquidity lines.
Article 422 (10) and Article 425 (6) of the CRR mandate the EBA to develop draft regulatory technical standards to further specify such additional objective criteria. These draft RTS fulfill this mandate.