Article 419 of the Capital Requirements Regulation (CRR) relates to currencies with constraints on the availability of liquid assets for the purpose of calculating the liquidity coverage ratio (LCR). This article has been amended as part of the RMM package (Regulation (EU) 2019/876 of 20 May 2019) to introduce an additional derogation for the currencies concerned. There are three derogations available, namely to allow the use of liquid assets denominated in a foreign currency, the use of specific credit lines committed by the relevant central bank as liquid assets, and the use of additional level 2 liquid assets to meet the LCR. The derogations are intended to address the inherent difficulties that institutions would face in meeting their liquidity coverage requirement in such currencies where it is not possible to reduce, by sound liquidity management, the resultant need for liquid assets and the holdings of those assets by other market participants.
The implementing technical standards (ITS) of Article 419(4) of the CRR (Commission Implementing Regulation (EU) 2015/2344) list currencies with constraints on the availability of liquid assets. For these currencies, the justified need for liquid assets in light of the liquidity coverage requirement in Article 412 of the CRR exceed the availability of those liquid assets in a currency. Currently, the list in the ITS consists of one currency, the Norwegian krone (NOK).
On 26 January 2022, the European Banking Authority (EBA) published its final report containing draft ITS that amend Commission Implementing Regulation (EU) 2015/2344 by removing the NOK from the list. The EBA states that the reason for the proposed amendment relates to the change in the supply of and demand for NOK-denominated liquid assets since the assessment underlying the existing ITS. Given that there is no longer a shortage in the supply of liquid assets in the NOK currency, the derogations are no longer deemed necessary.
The draft ITS will be submitted to the Commission for endorsement before being published in the Official Journal of the European Union. The technical standards will apply 20 days after their publication in the Official Journal of the European Union.