+423. In setting the liquidity and funding adequacy score, competent authorities should, where …

423. In setting the liquidity and funding adequacy score, competent authorities should, where …

In setting the liquidity and funding adequacy score, competent authorities should, where applicable, consider the score of the liquidity overall recovery capacity in recovery planning (weak, adequate with potential room for improvement, satisfactory) as specified in paragraphs 41-43 of the EBA Guidelines on overall recovery capacity in recovery planning⁵⁷ . The consideration of the overall recovery capacity score in the context of liquidity adequacy is especially relevant in case of a ‘weak’ overall recovery capacity score for liquidity.

Table 17. Supervisory considerations for assigning a liquidity and funding adequacy score

Risk Supervisory score view	Considerations • • • •	in relation to inherent Considerations in relation to risk adequate management and controls There is non-material/very low risk arising from mismatches (e.g. between maturities, currencies). The size and composition of the liquidity buffer is adequate and appropriate. The level of other drivers of • There is consistency between the liquidity risk (e.g. reputational risk, institution’s liquidity /funding risk inability to transfer intra-group policy and strategy and its overall liquidity) is not material/very low. strategy and risk appetite. The institution’s counterbalancing • The organisational framework for
There is a low risk of significant prudential impact on the 1 institution considering the level of inherent risk and the management and controls.	• • • • •	capacity and liquidity buffers are liquidity and funding risk is robust comfortably above supervisory with clear responsibilities and a quantitative requirements and are clear separation of tasks between expected to remain so in the future. risk-takers and management and The free flow of liquidity between control functions. entities in the group, where • Liquidity and funding risk relevant, is not impeded, or all measurement, monitoring and entities have a counterbalancing reporting systems are appropriate. capacity and liquidity buffers above • Internal limits and the control supervisory requirements. framework for liquidity risk are There is non-material/very low risk sound and are in line with the from the institution’s funding institution’s risk management profile or its sustainability. strategy and risk appetite. The risk posed by the stability of • The institution has a plausible and funding is not material. credible liquidity contingency plan Other drivers of funding risk (e.g. that has the potential to be reputational risk, access to funding effective if required. markets) are not material/very low. The composition and stability of longer-term funding (>1 year) pose non-material/very low risk in relation to the activities and business model of the institution.
Risk Supervisory score view	Considerations • • • • •	in relation to inherent Considerations in relation to risk adequate management and controls The overall recovery capacity of the institution with regard to liquidity resulting from the supervisory assessment, is ‘satisfactory’. Mismatches (e.g. between maturities, currencies) entail low to medium risk. The risk posed by the size and composition of the liquidity buffer is low to medium. The level of other drivers of liquidity risk (e.g. reputational risk, inability to transfer intra-group liquidity) is low to medium. The institution’s counterbalancing capacity and liquidity buffers are above supervisory quantitative
There is a medium-low risk of significant prudential impact on the 2 institution considering the level of inherent risk and the management and controls.	• • • • • •	requirements, but there is a risk that they will not remain so in the future. The free flow of liquidity between entities in the group, where relevant, is or could be marginally impeded. The risk posed by the institution’s funding profile and its sustainability is low to medium. The risk posed by the stability of funding is low to medium. Other drivers of funding risk (e.g. reputational risk, access to funding markets) are low to medium. The composition and stability of longer-term funding (>1 year) pose a low level of risk in relation to the activities and business model of the institution. The overall recovery capacity of the institution with regard to liquidity, resulting from the supervisory assessment, is ‘ satisfactory ’ or ‘ adequate with room for improvement ’ .
There is a medium-high risk of significant 3 prudential impact on the institution considering the level of	• • •	Mismatches (e.g. between • There is not full consistency maturities, currencies) entail between the institution’s liquidity medium to high risk. and funding risk policy and strategy The risk posed by the size and and its overall strategy and risk composition of the liquidity buffer appetite. is medium to high. • The organisational framework for The level of other drivers of liquidity and funding risk does not liquidity risk (e.g. reputational risk, sufficiently separate
Risk Supervisory score view inherent risk and the management and controls.	Considerations • • • • • • • • •	in relation to inherent Considerations in relation to risk adequate management and controls inability to transfer intra-group responsibilities and tasks between liquidity) is medium to high. risk-takers and management and The institution’s counterbalancing control functions. capacity and liquidity buffers are • Liquidity and funding risk deteriorating and/or are below measurement, monitoring and supervisory quantitative reporting systems are not requirements, and there are undertaken with sufficient accuracy concerns about the institution’s and frequency. ability to restore compliance with • Internal limits and the control these requirements in a timely framework for liquidity and funding manner. risk are not in line with the The free flow of liquidity between institution’s risk management entities in the group, where strategy or risk appetite. relevant, is impeded. • The institution has a liquidity The risk posed by the institution’s contingency plan that is unlikely to funding profile and its sustainability be effective or the institution has is medium to high. no liquidity contingency plan, or The risk posed by the stability of one that is manifestly inadequate funding is medium to high. Other drivers of funding risk (e.g. reputational risk, access to funding markets) are medium to high. The composition and stability of longer-term funding (>1 year) pose a medium level of risk in relation to the activities and business model of the institution. The overall recovery capacity of the institution with regard to liquidity, resulting from the supervisory assessment, is ‘ adequate with room for improvement ’ or ‘ weak ’ . Mismatches (e.g. between maturities, currencies) entail high risk. The risk posed by the size and
There is a high risk of significant prudential impact on the institution 4 considering the level of inherent risk and the management and controls.	• •	composition of the liquidity buffer is high. The level of other drivers of liquidity risk (e.g. reputational risk, inability to transfer intra-group liquidity) is high. The institution’s counterbalancing capacity and liquidity buffers are rapidly deteriorating and/or are below the supervisory quantitative requirements, and there are serious concerns about the institution’s ability to restore compliance with these requirements in a timely manner.
Risk Supervisory score view	Considerations • • • • • •	in relation to inherent Considerations in relation to risk adequate management and controls The free flow of liquidity between entities in the group, where relevant, is severely impeded. The risk posed by the institution’s funding profile and its sustainability is high. The risk posed by the stability of funding is high. Other drivers of funding risk (e.g. reputational risk, access to funding markets) are high. The composition and stability of longer-term funding (>1 year) pose a high level of risk in relation to the activities and business model of the institution. The overall recovery capacity of the institution with regard to liquidity, resulting from the supervisory assessment, is ‘ weak ’ .

⁵⁷ EBA/GL/2023/06

1. Преглед

Наименование	Регулация

1.1 Препратки

1.2 Идентифицирани изисквания

1.3 Свързани стандарти

2. Идентифицирани изисквания

Изисквания
Източник	Изискване

3. Свързани стандарти

Стандарти
Източник	Изискване

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