12 July 2019
The European Banking Authority (EBA) published today its first Report on the monitoring of liquidity coverage ratio (LCR) implementation in the EU. The EBA's monitoring of the LCR contributes to a consistent application of EU law and promotes common supervisory approaches and practices in this area. The EBA intends to regularly monitor the implementation of the LCR for EU banks and update this Report on an ongoing basis to set out its observations and provide further guidance, where necessary.
The general objective of the EBA monitoring work in the area of liquidity is to foster a higher degree of harmonisation in the implementation of the LCR in the areas where divergent practices have been observed, partly due to insufficient clarity of the regulatory provisions.
In the Report, the EBA has highlighted areas in which further guidance is deemed useful for banks and supervisors in order to foster a common understanding and harmonisation of the application of the liquidity standard, while at the same time reducing some issues on the level playing field. In particular, the Report provides guidance on operational deposits and retail deposits excluded from outflows as well as on notifications on additional liquidity outflows. In addition, the Report has identified areas that may need further attention from supervisors in their ongoing supervision of liquidity risks.
The EBA will further assess how the guidance provided in the report will be used by banks and supervisors and consider taking further steps if needed (including some fully fledged products such as guidelines, recommendations, etc.), while continuing its monitoring of the aspects mentioned in the report.
The LCR is applicable in the EU since 1 October 2015, and its full implementation at a minimum of 100% became effective in January 2018. This put an end to any national provisions in the area of liquidity requirements laid down in the capital requirements regulation (CRR).
The EBA intends to regularly monitor the implementation of the LCR for EU banks and update this report on an ongoing basis to set out its observations and additional guidance, where necessary. The EBA is currently working on the implementation related to outflows with interdependent inflows (Article 26 of the LCR Delegated Regulation), the LCR calculated by significant currency and HQLA diversification.