16 January 2015

EBA says impact of liquidity coverage requirements for EU banks not likely to have adverse effects

Overall, this analysis points to improvements of EU banks' compliance with Liquidity Coverage Ratio (LCR) requirements and shows that the implementation of the LCR is not likely to have a negative impact on the stability of financial markets and of the supply of bank lending.

Overall, the analysis carried out by the EBA shows that the general liquidity requirement is not likely to have a material detrimental impact on the stability and orderly functioning of financial markets or on the economy and the stability of the supply of bank lending. To a large extent, this can be explained by the significant improvement, in terms of compliance, of EU banks with Liquidity Coverage Ratio (LCR) requirements; the potential for balance sheet adjustments to meet LCR requirements; the absence of supply constraints overall at country level due to redistribution of credit supply from non-compliant to compliant banks.

The EBA's analysis also concluded that the implementation of the envisaged Delegated Act by the EC will have a marked positive impact on the LCR of specialised credit institutions, such as factoring and leasing, auto and consumer credit banks and other specialised credit institutions which were identified in the EBA's first LCR IA report as being potentially detrimentally affected by the LCR.

This EBA analysis will serve as a basis for EU policy makers in their work on high quality securitisation in the EU banking sector, which, by ensuring banks have sufficient liquid assets, will ultimately strengthen their resilience.

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