EBA amends standards on currencies with constraints on the availability of liquid assets

The European Banking Authority (EBA) published today its final Report on amendments to its Implementing Technical Standards (ITS) on currencies with constraints on the availability of liquid assets in the context of the liquidity coverage ratio (LCR). The proposed amendments remove the Norwegian Krone (NOK) from the list. As a result, no currency will be recognised as having constraints on the availability of liquid assets.

Following the addition of a new derogation, the EBA has been tasked to amend the existing Regulatory Technical Standards (RTS)  specifying the use of derogations and the conditions of their application. Given their interdependence, such a review needs to be accompanied by a reassessment of the corresponding ITS on the effective list of currencies with constraints, which currently consists of one single currency, the NOK.

Based on the updated data analysis, which demonstrates that there is no longer a shortage in the supply of liquid assets in the NOK currency, the EBA proposed to amend the ITS by removing NOK from the list.  Since this amendment will lead to an empty list, in order to keep its regulatory efforts proportionate to their impact, the EBA will not update the corresponding RTS. If a future assessment shows the need for a currency to be added to the list, the EBA will propose an update of the corresponding RTS.

Legal basis and background

These draft ITS have been developed on the basis of Article 419 of Regulation (EU) No 575/2013 of the European Parliament and of the Council), as amended by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019, which mandates the Authority to list the currencies with constraints on the availability of liquid assets and specify the derogations and conditions of their application.

Article 419 of the Capital Requirements Regulation (CRR) specifies a number of derogations applicable to currencies with constraints on the availability of liquid assets for the purpose of the calculation of the LCR. An additional derogation was added as part of the Risk Reduction Measures (RRM) package adopted by the European legislators