In August, BaFin published new circulars on the quantitative liquidity standards of the CRR (Capital Requirements Regulation), which, in particular,
- address the regulatory treatment of off-balance sheet products in the structural liquidity ratio (Net Stable Funding Ratio – NSFR or “simplified NSFR”) as well as
- adjust the materiality criteria for annual reporting (Art. 23 of Delegated Regulation 2015/61).
The two circulars are relevant for all institutions to which Article 6 (2) CRR apply and which are classified as “Less Significant Institutions (LSIs)” pursuant to Article 6 (4) SSM Regulation, as well as for all institutions pursuant to Section 1a German Banking Act (KWG) which are not CRR credit institutions, but which are classified as CRR credit institutions with regard to the application of certain standards (Section 1a (1) KWG).
The adjustment of the materiality criteria is intended in particular to relieve many institutions of the reporting obligation, to ensure that reports only have to be submitted by institutions for which the respective product groups are also relevant in terms of substance, i.e. higher thresholds for the materiality criteria and more precise determination of the products and services covered by Art. 23 (1) a) – h) IR 2015/61 and associated liquidity outflows.
The liquidity standards distinguish between liquidity coverage ratio (LCR) and the structural liquidity ratio (NSFR). The NSFR is intended to hedge structural, longer-term liquidity risk, i.e., to ensure that institutions have sufficient and stable funding over the long term to reduce their stress sensitivity. Accordingly, institutions must have a minimum level of stable funding. The LCR, on the other hand, addresses short-term liquidity and ensures a liquidity buffer for a stress scenario of at least 30 days, with the respective stress scenario being specified by the supervisory authority.
Circular 6/2022 has been applicable since publication on August 1, 2022 and is to be taken into account for the first time for the reporting date of March 31, 2023. Circular 7/2022 applies from August 15, 2022.
To access the circulars, click here:
A summary of the measures and further background explanations can be found here.