EBA reports on the LCR and NSFR implementation in the EU in the context of the new economic environment and TLTRO repayment

EBA published its third report on the monitoring of LCR and NSFR implementation in the EU. The report assesses the potential impact of upcoming central bank funding repayment and higher liquidity risk on LCR and NSFR levels. It also provides guidance to banks and supervisors on monitoring funding sources and emphasizes the importance of realistic funding plans.
The report highlights the potential reduction in LCR levels due to central bank funding repayment (mainly repayments of TLTRO), which may require banks to seek alternative funding sources. It also notes that the maturity of central bank funding could have a less material but still relevant impact on NSFR levels.
The EBA recommends that banks and supervisors continuously monitor market capacity and economic conditions for potential funding sources, particularly during periods of increased funding demand or market volatility. Funding plans should address both LCR and NSFR requirements, considering the suitability of funding alternatives for each ratio.
The report also mentions the need for additional information and analysis of liquidity situations in EU institutions, potentially leading to amendments in regulatory reporting requirements. However, it states that there is no intention to work on a methodology for a reduced outflow rate for stable retail deposits.