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  2. Single Rulebook Q&A
  3. 2024_7000 Treatment of inflows from credit facilities in LCR
Question ID
2024_7000
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Liquidity risk
Article
425, 460
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Article/Paragraph
32
Type of submitter
Credit institution
Subject matter
Treatment of inflows from credit facilities in LCR
Question

Is a credit institution entitled to consider inflows from a credit facility in LCR, if the credit facility contractually expires within 30 calendar days and the client has no contractual option to prolong it beyond its current expiry date?

Background on the question

According to Article 32 in Delegated Regulation (EU) 2015/61 an inflows from credit facility may be considered under LCR if its residual maturity is no longer than 30 calendar days. In the answer to question 2017_3266 EBA further explains that: With regard to debt to be repaid to the reporting credit institution in the context of credit facilities, only those facilities shall be considered where the expiry date falls within the next 30 calendar days and where there is no contractual option for prolongation. The reference to the option for prolongation in case of facilities expiring within the next 30 calendar dates is not fully clear, since it is not indicated who has this option: credit institution extending the facility or its client funding its needs with this facility.

In our view if it is the client who has the contractual option, there is an obligation for the credit institution to prolong the facility upon the client’s request. In this case the credit institution should not recognize the inflow in LCR, assuming that in stressed market conditions the client will exercise the option and prolong the facility. However if there is no such option for the client, i.e. assuming no additional actions the client is obliged to repay all funding within 30 calendar days and the credit institution has no obligation to prolong the facility even if the client requests so (potential prolongation is a discretional decision of the credit institution), the inflow can be recognized. 

We seek clarification with respect to the treatment of expected inflows from contracts where the expiry date falls within 30 calendar days and the credit institution has the contractual right, but not the obligation, to prolong the facility upon a potential client’s request.

Submission date
09/02/2024
Rejected publishing date
05/03/2024
Rationale for rejection

This question has been rejected because the matter it refers to has been answered in Article 32 of Delegated Regulation (EU) 2015/61 and Q&A 3266.

Status
Rejected question

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