Single Rulebook Q&A

Question ID: 2015_2112
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Liquidity risk
Article: 425
Paragraph: 2
Article/Paragraph : 32
COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Type of submitter: Competent authority
Subject matter : Reporting of inflows for term deposits with option for early withdrawal

Which inflow rate should apply to term deposits maturing beyond the 30 day horizon for which the depositor (being the reporting institution) has the option to withdraw its deposit without notice period?

Background on the question:

This question aims at clarifying the treatment of a term deposit having a contractual maturity of more than 30 days and where the depositor (being the reporting institution) can exercise an option to withdraw its deposits without notice period.

Q&A 1576 addresses the issue for current accounts in the context of correspondent banking activities stating that “current accounts held with other institutions, i.e. nostro account balances, are ‘at call’ and should therefore be treated as overnight deposits, leading to 100% inflow (as there are not reported in the stock of HQLA), which corresponds to the 100% outflow rate applied by the deposit receiving institution.” The same rationale could apply to term deposits with withdrawal option without notice period at the hand of the reporting institution.

Moreover, applying a 100% inflow rate to these deposits with such an option would be consistent with the treatment on the outflow side of the transaction, where the counterparty will assume a 100% outflow rate since the reporting institution may exercise the withdrawal option in times of stress.

Date of submission: 06/07/2015
Published as Final Q&A: 20/01/2017
EBA answer:

In accordance with Article 32(1) of the Commission Delegated Regulation (EU) No 2015/61, inflows may only comprise contractual inflows from exposures which are not past due and for which the institution has no reason to expect non-performance within the 30-day period. Article 31(10) envisages a 100% outflow rate for liabilities becoming due in 30 days other than those specifically determined in the LCR regulation.

Therefore, options that would advance inflows from term deposits to the reporting institution shall be considered contingent and not contractual, hence as not to be exercised. Accordingly, term deposits maturing beyond the 30 day horizon, for which the depositor (being the reporting institution) has the option to withdraw the money within the next 30 days, shall not be considered as inflows in the LCR.

Status: Final Q&A
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