The European Banking Authority (EBA) today published an updated Report on the monitoring of the liquidity coverage ratio (LCR) and the net stable founding ration (NSFR) in the EU. This update is necessary in light of the banking turmoil experienced in March 2023, which highlighted the need for enhanced supervision of various liquidity aspects resulting from the change in the interest rate environment and related trends in deposit behaviour and concentrations.

In particular, this Report provides further clarification for the recognition in the LCR calculation of LCR inflows from open reverse repos without a maturity date within 30 days, following Q&A 2024_7053 (published on 3 May 2024). It builds on two approaches, the first of which builds on the occurrence of a trigger event to terminate the transaction, and the second one on historical experience. The Report also considers how recently, in some banks, operational deposits increased while excess operational deposits decreased, and how the interest rate environment changed. In this context, the Report supplements the guidance provided in the EBA’s 2019 Report on identifying operational deposits, the characteristics of the operational deposit trade cycle, and the material penalty for retail term deposits.

Lastly, an Addendum to the EBA’s 2023 Report on interdependent assets and liabilities in the NSFR is also included. It clarifies regulatory expectations regarding indirect client clearing activities, where affiliated institutions rather than an IPS structure – which is already covered in the 2023 Report – are involved.