In the context of the reporting of stable funding (i.e., C 60.00 and C 61.00), we have the following two questions: (1) How should institutions report retail term deposits with a residual maturity of four months but where early withdrawal (i.e., < three months) is possible contingent upon the payment of a penalty that corresponds to the interests due for the time that elapsed between the date of deposit and the date of withdrawal? Are these deposits to be reported in the maturity bucket “within three months” or “between three and 6 months”? (2) Considering the deposits provided under (1), what would be the treatment if these deposits are provided by wholesale customers?
In “Basel III – The Net Stable Funding ratio: FAQ”, published in July 2016, question 22: “In line with the treatment for the LCR, but with a different relevant horizon, deposits maturing below one year, or which can be withdrawn early without a significant penalty, that are classified as retail term deposits in the LCR should, for purposes of the NSFR, be classified according to their characteristics (eg insured, held in transactional account etc) as stable or less stable. Retail term deposits maturing over one year and which cannot be withdrawn early without significant penalty are subject to a 100% ASF.” The issue is to understand if a retail term deposit with maturity higher than 1 year without capital penalties but with the loss of all of the interests is considered "without significant penalty"
The instructions to the reporting template on items providing stable funding (C 61.00) in Regulation (EU) No 680/2014 specify that, for the purpose of determining the residual maturity of liabilities, institutions have to consider the earliest date at w hich such liabilities can contractually be called, except for retail deposits for w hich the same assumptions as applied in the context of the LCR shall be used. On this basis, and referring to the tw o questions, institutions shall consider the following:
(a) for retail deposits, institutions shall not take into account options for early w ithdrawals w here the depositor has to pay a material penalty for early w ithdraw als, w ith such
penalty being laid dow n in Article 25(4)(b) of Delegated Regulation (EU) 2015/61;and
(b) for all other deposits not referred to under (a), institutions shall consider the earliest date at w hich deposits can contractually be called, irrespective of any penalty to be
paid for early w ithdrawal.
For the purpose of determining the materiality of a penalty to be paid in the context of the retail deposits referred to under (a), institutions are expected to consider the high-level principles set out in the first EBA report on the monitoring of the implementation of the LCR in the EU (Link, see in particular Chapter 2.2 of this report).