EBA欧洲银行-2018-EBA-Report-on-Liquidity-Measures-under-Article-5092812920of-the-CRR_46页_2mb

EBA Report on Liquidity Measures under Article 509(1) of the CRR (4 October 2018)

Core Content

This report, issued under Article 509(1) of the Capital Requirements Regulation (CRR), provides an analysis of banks' short-term liquidity risk profiles, focusing on the Liquidity Coverage Ratio (LCR) and its components. The data used is from the Common Reporting (COREP) system for December 2017, covering 126 banks (excluding subsidiaries) from the 28 EU Member States and one EEA/EFTA state.

Main Points

• LCR Overview:
  The weighted average LCR across banks is 145%, which is above the minimum requirement of 100% under full implementation. The LCR has been increasing since September 2016, mainly due to an increase in high-quality liquid assets (HQLA), while net liquidity outflows have remained relatively stable.

• LCR by Bank Groups:

  • GSILs (Global Systemically Important Institutions): LCR is 140%
  • O-SILs (Other Systemically Important Institutions): LCR is 147%
  • Other Banks: LCR is 165%
  • Only four banks had LCR below 100% in December 2017, while seven banks had a shortfall in September 2016.

• LCR by Country:
  The average LCR across most countries is within the 100-200% range. Some countries, such as Latvia, Romania, Bulgaria, and Slovenia, have significantly higher LCR levels (above 300%), while Greece has the lowest (below 100%).

• Composition of Liquid Assets:

  • Level 1 assets (excluding EHQCB) make up 91% of total liquid assets.
  • Level 1 assets consist mainly of cash and central bank reserves (48%) and securities (43%).
  • Level 2 assets contribute a smaller share, with eligible assets representing 5% of the total liquidity buffer.
  • The share of Level 1 assets varies by country: Lithuania and Estonia have a 92% share of cash and central bank reserves, while Poland, Romania, and Slovakia have a 82% share of Level 1 securities.

• Composition of Cash Outflows and Inflows:

  • Cash outflows (post-weight) represent 16% of total assets.
  • Non-operational deposits are the main component of cash outflows, accounting for 6% of total assets.
  • Cash inflows are more than 5% of total assets, but generally capped at 75% of total outflows.
  • Four banks have inflows exempt from the cap, with some allowed up to 90%.

• Currency Mismatch and LCR:

  • There is a currency mismatch between banks' liquidity buffers and their net liquidity outflows.
  • USD is the most significant foreign currency showing lower LCR levels.
  • The LCR regulation requires banks to ensure that the currency denomination of their liquid assets aligns with their net liquidity outflows.
  • Competent authorities may use discretion to limit currency mismatches by imposing caps on net outflows in significant currencies.

• Impact of Central Bank Policies:

  • Central bank assets and exposures are a major component of liquidity buffers, especially for GSILs and O-SILs.
  • The ECB's TLTROs and QE have increased liquidity buffers, but the end of these programs could reduce liquidity if banks do not adjust their strategies.
  • The 2018 EBA report indicates a shift from public sector funding to market-based funding.

• Interactions with Other Regulatory Ratios:

  • There is no correlation between LCR and leverage ratio.
  • Some banks have high leverage ratios and low LCRs, while others have low leverage ratios and high LCRs.

Key Information

• LCR Calculation:
  LCR is calculated as the ratio of high-quality liquid assets (HQLA) to net liquidity outflows over a 30-day stress period. The minimum requirement is 100%, with an interim requirement of 80% (until January 2018).

• Data Sources:

  • The analysis is based on COREP data from 126 banks (excluding subsidiaries) and includes subsidiaries for some analyses.
  • The sample covers ~EUR 29 trillion in total assets, or ~80% of the EU banking sector.

• Methodology:

  • The report includes weighted averages and capped liquidity inflows.
  • Exemptions from the cap are allowed for certain types of inflows, such as intra-group and intra-institutional flows, with approval from competent authorities.

• Regulatory Context:

  • The LCR is part of the CRR and is regulated by the ECB and the EBA.
  • The net stable funding ratio (NSFR) and leverage ratio are also considered in the analysis.

Summary of Key Figures and Tables

• Figure 1: LCR evolution (weighted average) shows a steady increase since 2016.
• Figure 2: LCR levels are lower for GSILs and O-SILs compared to other banks.
• Figure 3: LCR varies significantly across countries.
• Figure 4: LCR dispersion is higher in certain countries, such as Ireland.
• Figure 5: GSILs and O-SILs show a greater increase in LCR in the last quarter of 2017.
• Figure 6: HQLA and net liquidity outflows are compared, with the 45° line indicating LCR of 100%.
• Figure 7: Liquidity shortfall decreased from over EUR 26.7 billion to EUR 20.8 billion.
• Figure 8: The number of banks with a liquidity shortfall reduced from seven to four.
• Figure 9 and 10: The increase in LCR is mainly due to HQLA, with net outflows remaining stable.
• Figure 11: No correlation is found between LCR and leverage ratio.
• Figure 12: Liquid assets are composed mostly of Level 1 assets, with a smaller contribution from Level 2.
• Figure 13: Central bank assets and exposures have increased, especially for GSILs and O-SILs.
• Figure 14: Non-operational deposits are the main component of cash outflows.
• Figure 15: Collateral posted for secured funding transactions with central banks is analyzed.
• Figure 16: Cash inflows are capped at 75% of total outflows.
• Figure 17: Liquidity buffer and net outflows are analyzed across currencies.
• Figure 18-35: Provide detailed analysis of LCR by business model and currency.

Business Models and LCR

• The report includes breakdowns by business models, with different levels of LCR observed.
• GSILs and O-SILs tend to hold more central bank reserves and fewer EHQCB compared to other banks.
• Other banks have a higher proportion of EHQCB in their liquidity buffer.

Conclusion

The report highlights that banks are generally meeting the LCR requirements, with a clear upward trend in liquidity coverage. However, currency mismatches and dispersion in LCR levels across countries and business models remain areas of concern. The impact of central bank policies on liquidity buffers is significant, and banks are advised to adjust their funding strategies accordingly.