The European Banking Authority (EBA) has issued its final draft regulatory technical standards (RTS) on the criteria for the application of a preferential treatment in cross-border intragroup credit or liquidity lines, or within an institutional protection scheme.These RTSs further specify the additional criteria listed in the in the context of the liquidity coverage ratio (LCR) Delegated Act for the application of the preferential treatment.
Under the new RTS, a low liquidity risk profile of the liquidity provider and receiver required in the LCR Delegated Act will be determined on the basis of its compliance with the LCR and the Pillar 2 requirements, as well as on the basis of the outcome of the latest supervisory review and evaluation process. Credit institutions’ management bodies will be required to submit a written and reasoned legal opinion certifying that any such credit or liquidity line in the LCR Delegated Act is a committed line legally and practically available at any time.
Such credit liquidity lines will be subject to other requirements such as those relating to currency denomination or maturity dates, so as to reinforce the appropriateness of the line for the application of the preferential treatment. Regarding the requirement in the LCR Delegated Act to take into account the liquidity risk profile of the liquidity receiver in the liquidity risk management plans of the liquidity provider, the liquidity provider shall monitor and oversee the liquidity position of the receiver on a daily basis. The contingency funding plan of the liquidity provider shall ensure that the liquidity support to the receiver is guaranteed even in times of stress.