Single Rulebook Q&A

Question ID: 2015_2303
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Liquidity risk
Article: 421, 460
Paragraph:
Subparagraph:
COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Article/Paragraph : Art. 25 paragraph 2 letter (c) point (i)
Type of submitter: Credit institution
Subject matter : Definition of retail deposits with higher outflow rate
Question:

What is the definition of the condition for retail deposit with higher outflow rate: "the rate significantly exceeds the average rate for similar retail products"? Bucketing our retail deposits we have a two-fold problem with defining when deposit rate on our product significantly exceeds or does not exceed the average rate for similar retail product.

Background on the question:

I) Our institution usually offers deposit rates that are above average deposit rates offered by our local competitors, but we do not consider this spread as significant. Is there any specification, or even simplification, when deposit rate should be considered as significantly exceeding average rate for similar retail products?
II) What if institution offers deposit product that has unique characteristics and no peer group products in the local market. Should all deposits within this product be automatically considered as deposits with rates significantly exceeding average rate?

Date of submission: 17/09/2015
Published as Final Q&A: 27/04/2018
EBA answer:

A methodology for the identification of retail deposits subject to higher outflow rates is described in Article 25 of the Delegated Regulation (EU) 2015/61.

In this regard an institution should look at similar products in other institutions with comparable business model and size in its local deposit market and assess whether or not it applies significant higher return than its peers do on average. This assessment should be conducted by the institution itself and verified by the competent authority if necessary.

The condition in Article 25(2)(c)(i) of the Delegated Regulation (EU) 2015/61 should not be considered to be met where an institution offers a deposit product which is not similar to any other in the market since the deposit cannot strictly be considered to be rate-driven in the context of such provision. Again the cited verification by competent authority applies if necessary.

 

Note: This Q&A (originally published on 13 May 2016) has been amended on 27 April 2018 to reflect that Guidelines on retail deposits subject to different outflows for purposes of liquidity reporting under Regulation (EU) No 575/2013 were repealed.

Previous answer:

A methodology for the identification of retail deposits subject to higher outflow rates is described in the Delegated Regulation (EU) 2015/61. Further explanation of the risk factors listed there and considered for such identification can be found in the EBA Guidelines EBA/GL/2013/01 on retail deposits subject to different outflows for purposes of liquidity reporting under Regulation (EU) No 575/2013, on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Capital Requirements Regulation 13 CRR).

In this regard an institution should look at similar products in other institutions with comparable business model and size in its local deposit market and assess whether or not it applies significant higher return than its peers do on average. This assessment should be conducted by the institution itself and verified by the competent authority if necessary.

The risk factor envisaged in Article 25(2)(c)(i) of the Delegated Regulation (EU) 2015/61 should not be considered to be met where an institution offers a deposit product which is not similar to any other in the market since the deposit cannot strictly be considered to be rate-driven in the context of such provision. Again the cited verification by competent authority applies if necessary.

Status: Final Q&A
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