Single Rulebook Q&A

Question ID: 2016_2585
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Liquidity risk
Article: Article 423(4) of Regulation (EU) No. 575/2013 (CRR)
Paragraph: 4
Subparagraph:
COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Article/Paragraph : Article 30 (5) of Com Delageted Act
Type of submitter: Investment firm
Subject matter : Reporting of assets sold short as a additional outflow for LCR under Delegated Act
Question:

For the purposes of reporting additional outflow for short positions in the LCR (row ID 1.1.4.6.2) on the C73 return, are firms required to report both unsettled and settled uncovered sold short positions?

Background on the question:

Article 30 (5) of Com Delegated Act states:

"The credit institution shall add an additional outflow corresponding to 100% of the market value of securities or other assets sold short and to be delivered within 30

calendar days unless the credit institution owns the securities to be delivered or has borrowed them at terms requiring their return only after 30 calendar days and the
securities do not form part of the liquid assets of credit institutions. If the short position is being covered by a collateralised securities financing transaction, the
credit institution shall assume the short position will be maintained throughout the 30 calendar day period and receive a 0% outflow
".

In the case of settled uncovered sold short positions, if the position is on a security that is HQLA eligible, is this still required to be reported as an additional outflow, as to do so would double count this position (to the extent of the value after hair cut reported in HQLA)?

To break this down, a net short would not be included as HQLA stock (as not considered unencumbered). However my query relates to short positions that are covered by reverse repo on day 1 and the net long value counts toward HQLA stock, but the reverse repo coverage is not deemed acceptable for sold short additional outflow coverage as it matures within 30days.ow".

Date of submission: 21/01/2016
Published as Final Q&A: 08/02/2019
EBA answer:

This answer only treats short sales covered by a collateralised securities financing transaction.

As specified under Article 30(5) of LCR Commission Delegated Regulation (EU) 2015/61, if a short sale is covered by a collateralised securities financing transaction, the credit institution shall assume that the short position will be maintained throughout the 30 calendar day period and receive a 0% outflow. At the same time, in accordance with Article 32(3)(b) of LCR Commission Delegated Regulation (EU) 2015/61, no inflow shall be taken into consideration from the related reverse repo transaction.

Status: Final Q&A
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