The EBA publishes Report on interdependent assets and liabilities in the net stable funding ratio

EBA has released a report on the treatment of interdependent assets and liabilities in the NSFR. Interdependent assets and liabilities are transactions where no funding risk exists for the institution, making them exempt from stable funding requirements in the NSFR calculation.
The report evaluates the conditions under which assets and liabilities can be considered interdependent in the NSFR and provides recommendations. The EBA analyzed specific cases, including centralised regulated savings and promotional lending, to determine compliance with the conditions for treating assets and liabilities as interdependent.
Key points from the report:
– Interdependent Assets and Liabilities: Interdependent assets and liabilities are transactions exempt from stable funding requirements. They must meet specific conditions outlined in Article 428f CRR.
– EBA’s Assessment: The EBA assessed cases involving centralised regulated savings and promotional lending activities. It examined compliance with conditions such as clear identification of assets and liabilities, matching maturities, absence of funding risk, and distinct counterparties.
– Centralised Regulated Savings: The report describes cases where banks centralize a portion of regulated savings with a public institution to finance government policies, such as social housing and sustainable development. These cases demonstrate compliance with the conditions for interdependent assets and liabilities.
– Promotional Lending: Promotional lending involves loans targeting public objectives, such as export promotion. The EBA evaluated these cases and determined compliance with the conditions for interdependence.
– Policy Recommendations: The report includes limited policy recommendations. It suggests amendments to the conditions for covered bonds with extendable maturity triggers, ensuring observable market triggers for automatic extension. Additionally, the EBA recommends clarifying language regarding derivative client clearing activities to ensure absence of funding risk.
– NSFR Impact: The report highlights that applying the treatment of interdependent assets and liabilities can impact the NSFR values, with varying degrees of impact depending on the specific cases.
– Continued Monitoring: The EBA will continue to monitor other possible transactions that could be reported as interdependent assets and liabilities in the NSFR, working in cooperation with competent authorities.