Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 Text with EEA relevance

• (d) 25 % if they are collateralized by assets that would not qualify as liquid assets in accordance with Article 416 and the lender is the central government, a public sector entity of the Member State in which the credit institution has been authorised or has established a branch, or a multilateral development bank. Public sector entities that receive that treatment shall be limited to those that have a risk weight of 20 % or lower in accordance with Chapter 2, Title II of Part Three;

• (e) 0 % if the lender is a central bank.

• (a) by the depositor in order to obtain clearing, custody or cash management or other comparable services from the institution;

• (b) in the context of common task sharing within an institutional protection scheme meeting the requirements of Article 113(7) or as a legal or statutory minimum deposit by another entity being a Member of the same institutional protection scheme;

• (c) by the depositor in the context of an established operational relationship other than that mentioned in point (a);

• (d) by the depositor to obtain cash clearing and central credit institution services and where the credit institution belongs to a network in accordance with legal or statutory provisions;

by 5 % in the case of point (a) to the extent to which they are covered by a Deposit Guarantee Scheme in accordance with Directive 94/19/EC or an equivalent deposit guarantee scheme in a third country and by 25 % otherwise.

Deposits from credit institutions placed at central credit institutions that are considered as liquid assets in accordance with Article 416(1)(f) shall be multiplied by 100 % outflow rate.

Pending a uniform definition of an established operational relationship as referred to in point (c) of paragraph 3, institutions shall themselves establish the criteria for identifying an established operational relationship for which they have evidence that the client is unable to withdraw amounts legally due over a 30-day time horizon without compromising its operational functioning and shall report those criteria to the competent authorities. In the absence of a uniform definition, competent authorities may provide general guidance that institutions are to follow in identifying deposits maintained by the depositor in a context of an established operational relationship.

• (a) the counterparty is any of the following:
• (i) a parent or subsidiary institution of the institution, or a parent or subsidiary investment firm of the institution, or another subsidiary of the same parent institution or parent investment firm;
• (ii) the counterparty is linked to the institution by a relationship within the meaning of Article 22(7) of Directive 2013/34/EU;
• (iii) an institution falling within the same institutional protection scheme meeting the requirements of Article 113(7); or
• (iv) the central institution or a member of a network compliant with point (d) of Article 400(2);

• (b) there are reasons to expect a lower outflow over the next 30 days even under a combined idiosyncratic and market-wide stress scenario;

• (c) a corresponding symmetric or more conservative inflow is applied by the counterparty by way of derogation from Article 425;

• (d) the institution and the counterparty are established in the same Member State.

EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2015.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 423

Additional outflows

EBA shall develop draft regulatory technical standards to specify the conditions under which the notion of materiality may be applied and specifying methods for the measurement of the additional outflow.

EBA shall submit those draft regulatory technical standards to the Commission by 31 March 2014.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the second subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

• (a) the excess collateral the institution holds that can be contractually called at any time by the counterparty;

• (b) collateral that is due to be returned to a counterparty;

- (c) collateral that corresponds to assets that would qualify as liquid assets for the purposes of Article 416 that can be substituted for assets corresponding to assets that would not qualify as liquid assets for the purposes of Article 416 without the consent of the institution.

Article 424

Outflows from credit and liquidity facilities

• (a) they do not qualify for the retail exposure class under the Standardised or IRB approaches for credit risk;

• (b) they have been provided to clients that are not financial customers;

• (c) they have not been provided for the purpose of replacing funding of the client in situations where he is unable to obtain its funding requirements in the financial markets.

• (a) liquidity facilities that the institution has granted to SSPEs other than those referred to in point (b) of paragraph 3;

• (b) arrangements under which the institution is required to buy or swap assets from an SSPE;

• (c) facilities extended to credit institutions;

- (d) facilities extended to financial institutions and investment firms.

Article 425

Inflows

Institutions may exempt liquidity inflows from monies due from borrowers and bond investors where those inflows are related to mortgage lending funded by bonds eligible for the treatment set out in Article 129(4), (5) or (6) of this Regulation or by covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162 from that cap. Institutions may exempt inflows from promotional loans that the institutions have passed through. Subject to the prior approval of the competent authority responsible for supervision on an individual basis, the institution may fully or partially exempt inflows where the liquidity provider is a parent or subsidiary institution of the institution, a parent or subsidiary investment firm of the institution or another subsidiary of the same parent institution or parent investment firm or is related to the institution as set out in Article 22(7) of Directive 2013/34/EU.

• (a) monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50 % of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph. By way of derogation from the first subparagraph of this point, institutions that have received a commitment referred to in Article 424(6) in order for them to disburse a promotional loan to a final recipient may take an inflow into account up to the amount of the outflow they apply to the corresponding commitment to extend those promotional loans;

• (b) monies due from trade financing transactions referred to in point (b) of the second subparagraph of Article 162(3) with a residual maturity of up to 30 days, shall be taken into account in full as inflows;

• (c) loans with an undefined contractual end date shall be taken into account with a 20 % inflow, provided that the contract allows the institution to withdraw and request payment within 30 days;

• (d) monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 if they are collateralised by liquid assets as referred to in Article 416(1), shall not be taken into account up to the value net of haircuts of the liquid assets and shall be taken into account in full for the remaining monies due;

• (e) monies due that the institution owing those monies treats in accordance with Article 422(3) and (4), shall be multiplied by a corresponding symmetrical inflow;

• (f) monies due from positions in major index equity instruments provided that there is no double counting with liquid assets;

• (g) any undrawn credit or liquidity facilities and any other commitments received shall not be taken into account.

• (a) there are reasons to expect a higher inflow even under a combined market and idiosyncratic stress of the provider;

• (b) the counterparty is a parent or subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a relationship within the meaning of Article 22(7) of Directive 2013/34/EU or a member of the same institutional protection scheme referred to in Article 113(7) of this Regulation or the central institution or a member of a network that is subject to the waiver referred to in Article 10 of this Regulation;

• (c) a corresponding symmetric or more conservative outflow is applied by the counterparty by way of derogation from Articles 422, 423 and 424;

• (d) the institution and the counterparty are established in the same Member State.

EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2015.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

8. Institutions shall not report inflows from any new obligations entered into.

Article 426

Updating Future liquidity requirements

Following, the adoption by the Commission of a delegated act to specify the liquidity requirement in accordance with Article 460, EBA may develop draft implementing technical standards to specify the conditions set out in Article 421(1), Article 422, with the exception of paragraphs 8, 9 and 10 of that Article, and Article 424 to take account of standards agreed internationally.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

TITLE III REPORTING ON STABLE FUNDING

Article 427

Items providing stable funding

• (a) the following own funds, after deductions have been applied, where appropriate:
• (i) tier 1 capital instruments;
• (ii) tier 2 capital instruments;
• (iii) other preferred shares and capital instruments in excess of Tier 2 allowable amount having an effective maturity of one year or greater;

• (b) the following liabilities not included in point (a):
• (i) retail deposits that qualify for the treatment set out in Article 421(1);
• (ii) retail deposits that qualify for the treatment set out in Article 421(2);
• (iii) deposits that qualify for the treatment set out in Article 422 (3) and (4);
• (iv) of the deposits referred to in point (iii), those that are subject to a deposit guarantee scheme in accordance with Directive 94/19/EC or an equivalent deposit guarantee scheme in a third country deposit guarantees within the terms of Article 421(1);
• (v) of the deposits referred to in point (iii), those that fall under point (b) of Article 422(3);
• (vi) of the deposits referred to in point (iii), those that fall under point (d) of Article 422(3);
• (vii) amounts deposited not falling under point (i), (ii) or (iii) if they are not deposited by financial customers;
• (viii) all funding obtained from financial customers;
• (ix) separately for amounts falling under points (vii) and (viii) respectively, funding from secured lending and capital market-driven transactions as defined in point (3) of Article 192:
• — collateralised by assets that would qualify as liquid assets in accordance with Article 416;
• — collateralised by any other assets;
• (x) liabilities resulting from securities issued that qualify for the treatment set out in Article 129(4) or (5) of this Regulation or from covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162;
• (xi) the following other liabilities resulting from securities issued that do not fall under point (a):
• — liabilities resulting from securities issued with an effective maturity of one year or greater;
• — liabilities resulting from securities issued with an effective maturity of less than one year;
• (xii) any other liabilities.

• (a) within three months;

• (b) between three and six months;

• (c) between six and nine months;

- (d) between nine and 12 months;

• (e) after 12 months.

Article 428

Items requiring stable funding

• (a) the assets that would qualify as liquid assets in accordance with Article 416, broken down by asset type;

• (b) the following securities and money market instruments not included in point (a):
• (i) assets qualifying for credit step 1 under Article 122;
• (ii) assets qualifying for credit step 2 under Article 122;
• (iii) other assets;

• (c) equity securities of non-financial entities listed on a major index in a recognised exchange;

• (d) other equity securities;

• (e) gold;

• (f) other precious metals;

• (g) non-renewable loans and receivables, and separately those non-renewable loans and receivables for which borrowers are:
• (i) natural persons other than commercial sole proprietors and partnerships;
• (ii) SMEs that qualify for the retail exposure class under the Standardised or IRB approaches for credit risk or to a company which is eligible for the treatment set out in Article 153(4) and where the aggregate deposit placed by that client or group of connected clients is less than EUR 1 million;
• (iii) sovereigns, central banks and public sector entities;
• (iv) clients not referred to in points (i) and (ii) other than financial customers;
• (v) clients not referred to in points (i), (ii) and (iii) that are financial customers, and thereof separately those that are credit institutions and other financial customers;

• (h) non-renewable loans and receivables referred to in point (g), and thereof separately those that are:
• (i) collateralised by commercial immovable property (CRE);
• (ii) collateralised by residential property (RRE);
• (iii) match funded (pass‐through) via bonds eligible for the treatment set out in Article 129(4) or (5) of this Regulation or via covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162;

• (i) derivatives receivables;

• (j) any other assets;

- (k) undrawn credit facilities that qualify as bucket 4, bucket 3 or bucket 2 items under Annex I.

2. Where applicable, all items shall be presented in the five buckets described in Article 427(2).

TITLE IV THE NET STABLE FUNDING RATIO

CHAPTER 1 The net stable funding ratio

Article 428a

Application on a consolidated basis

Where the net stable funding ratio set out in this Title applies on a consolidated basis in accordance with Article 11(4), the following provisions shall apply:

• (a) the assets and off-balance-sheet items of a subsidiary having its head office in a third country which are subject to required stable funding factors under the net stable funding requirement set out in the national law of that third country that are higher than those specified in Chapter 4 shall be subject to consolidation in accordance with the higher factors specified in the national law of that third country;

- (b) the liabilities and own funds of a subsidiary having its head office in a third country which are subject to available stable funding factors under the net stable funding requirement set out in the national law of that third country that are lower than those specified in Chapter 3 shall be subject to consolidation in accordance with the lower factors specified in the national law of that third country;

• (c) third-country assets which meet the requirements laid down in the delegated act referred to in Article 460(1) and which are held by a subsidiary having its head office in a third country shall not be recognised as liquid assets for consolidation purposes where they do not qualify as liquid assets under the national law of that third country which sets out the liquidity coverage requirement.

Article 428b

The net stable funding ratio

Image omitted; see official source

In determining the level of any restriction on currency mismatches that may be applied in accordance with this Article, competent authorities shall at least consider:

• (a) whether the institution has the ability to transfer available stable funding from one currency to another and across jurisdictions and legal entities within its group and the ability to swap currencies and raise funds in foreign currency markets over the one-year horizon of the net stable funding ratio;

- (b) the impact of adverse exchange rate movements on existing mismatched positions and on the effectiveness of any foreign currency exchange hedges that are in place.

Any restriction on currency mismatches imposed in accordance with this Article shall constitute a specific liquidity requirement as referred to in Article 105 of Directive 2013/36/EU.

CHAPTER 2 General rules for the calculation of the net stable funding ratio

Article 428c

Calculation of the net stable funding ratio

3. Institutions shall not double count required stable funding and available stable funding.

Unless otherwise specified in this Title, where an item can be allocated to more than one required stable funding category, it shall be allocated to the required stable funding category that produces the greatest contractual required stable funding for that item.

Article 428d

Derivative contracts

• (a) those contracts have a residual maturity of less than six months;

• (b) the counterparty is the ECB or the central bank of a Member State;

- (c) the derivative contracts serve the monetary policy of the ECB or the central bank of a Member State.

Where a subsidiary having its head office in a third country benefits from the waiver referred to in the first subparagraph under the national law of that third country which sets out the net stable funding requirement, that waiver as specified in the national law of the third country shall be taken into account for consolidation purposes.

Article 428e

Netting of secured lending transactions and capital market-driven transactions

Assets and liabilities resulting from securities financing transactions with a single counterparty shall be calculated on a net basis, provided that those assets and liabilities comply with the netting conditions set out in Article 429b(4).

Article 428f

Interdependent assets and liabilities

• (a) the institution acts solely as a pass-through unit to channel the funding from the liability into the corresponding interdependent asset;

• (b) the individual interdependent assets and liabilities are clearly identifiable and have the same principal amount;

• (c) the asset and interdependent liability have substantially matched maturities, with a maximum delay of 20 days between the maturity of the asset and the maturity of the liability;

• (d) the interdependent liability has been requested pursuant to a legal, regulatory or contractual commitment and is not used to fund other assets;

• (e) the principal payment flows from the asset are not used for other purposes than repaying the interdependent liability;

• (f) the counterparties for each pair of interdependent assets and liabilities are not the same.

• (a) centralised regulated savings, provided that institutions are legally required to transfer regulated deposits to a centralised fund which is set up and controlled by the central government of a Member State and which provides loans to promote public interest objectives, and provided that the transfer of deposits to the centralised fund occurs on at least a monthly basis;

• (b) promotional loans and credit and liquidity facilities that fulfil the criteria set out in the delegated act referred to in Article 460(1) for institutions acting as simple intermediaries that do not incur any funding risk;

• (c) covered bonds that meet all the following conditions:
• (i) they are bonds referred to in Article 52(4) of Directive 2009/65/EC or they meet the eligibility requirements for the treatment set out in Article 129(4) or (5) of this Regulation;
• (ii) the underlying loans are fully match funded with the covered bonds that were issued or the covered bonds have non-discretionary extendable maturity triggers of one year or more until the term of the underlying loans in the event of refinancing failure at the maturity date of the covered bond;

- (d) derivative client clearing activities, provided that the institution does not provide to its clients guarantees of the performance of the CCP and, as a result, does not incur any funding risk.

Article 428g

Deposits in institutional protection schemes and cooperative networks

Where an institution belongs to an institutional protection scheme of the type referred to in Article 113(7), to a network that is eligible for the waiver provided for in Article 10, or to a cooperative network in a Member State, the sight deposits that the institution maintains with the central institution and that the depositing institution considers to be liquid assets pursuant to the delegated act referred to in Article 460(1) shall be subject to the following:

- (a) the depositing institution shall apply the required stable funding factor under Section 2 of Chapter 4, depending on the treatment of those sight deposits as level 1, level 2A or level 2B assets pursuant to the delegated act referred to in Article 460(1) and depending on the relevant haircut applied to those sight deposits for the calculation of the liquidity coverage ratio;

• (b) the central institution receiving the deposit shall apply the corresponding symmetric available stable funding factor.

Article 428h

Preferential treatment within a group or within an institutional protection scheme

• (a) the counterparty is one of the following:
• (i) the parent or a subsidiary of the institution;
• (ii) another subsidiary of the same parent;
• (iii) an undertaking that is related to the institution within the meaning of Article 22(7) of Directive 2013/34/EU;
• (iv) a member of the same institutional protection scheme referred to in Article 113(7) of this Regulation as the institution;
• (v) the central body or an affiliated credit institution of a network or a cooperative group as referred to in Article 10 of this Regulation;

• (b) there are reasons to expect that the liability or committed credit or liquidity facility received by the institution constitutes a more stable source of funding, or that the asset or committed credit or liquidity facility granted by the institution requires less stable funding over the one-year horizon of the net stable funding ratio than the same liability, asset or committed credit or liquidity facility received or granted by other counterparties;

• (c) the counterparty applies a required stable funding factor that is equal to or higher than the higher available stable funding factor or applies an available stable funding factor that is equal to or lower than the lower required stable funding factor;

• (d) the institution and the counterparty are established in the same Member State.

• (a) there are legally binding agreements and commitments between group entities regarding the liability, asset or committed credit or liquidity facility;

• (b) the funding provider presents a low funding risk profile;

- (c) the funding risk profile of the recipient of the funding has been adequately taken into account in the liquidity risk management of the funding provider.

The competent authorities shall consult each other in accordance with point (b) of Article 20(1) to determine whether the additional criteria set out in this paragraph are met.

CHAPTER 3 Available stable funding

Section 1 General provisions

Article 428i

Calculation of the amount of available stable funding

Unless otherwise specified in this Chapter, the amount of available stable funding shall be calculated by multiplying the accounting value of various categories or types of liabilities and own funds by the available stable funding factors to be applied under Section 2. The total amount of available stable funding shall be the sum of the weighted amounts of liabilities and own funds.

Bonds and other debt securities that are issued by the institution, sold exclusively in the retail market, and held in a retail account, may be treated as belonging to the appropriate retail deposit category. Limitations shall be in place, such that those instruments cannot be bought and held by parties other than retail customers.

Article 428j

Residual maturity of a liability or of own funds

3. Institutions shall treat deposits with fixed notice periods in accordance with their notice period, and shall treat term deposits in accordance with their residual maturity. By way of derogation from paragraph 2 of this Article, institutions shall not take into account options for early withdrawals where the depositor has to pay a material penalty for early withdrawals which occur in less than one year, such penalty being laid down in the delegated act referred to in Article 460(1), to determine the residual maturity of term retail deposits.

4. In order to determine the available stable funding factors to be applied under Section 2, institutions shall treat any portion of liabilities having a residual maturity of one year or more that matures in less than six months and any portion of such liabilities that matures between six months and less than one year as having a residual maturity of less than six months and between six months and less than one year, respectively.

Section 2 Available stable funding factors

Article 428k

0 % available stable funding factor

• (a) deferred tax liabilities, which shall be treated in accordance with the nearest possible date on which such liabilities could be realised;

• (b) minority interests, which shall be treated in accordance with the term of the instrument.

• (a) 0 %, where the effective residual maturity of the deferred tax liability or minority interest is less than six months;

• (b) 50 %, where the effective residual maturity of the deferred tax liability or minority interest is a minimum of six months but less than one year;

• (c) 100 %, where the effective residual maturity of the deferred tax liability or minority interest is one year or more.

• (a) trade date payables arising from purchases of financial instruments, of foreign currencies and of commodities, that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transactions, or that have failed to settle but are nonetheless expected to settle;

• (b) liabilities that are categorised as being interdependent with assets in accordance with Article 428f;

• (c) liabilities with a residual maturity of less than six months provided by:
• (i) the ECB or the central bank of a Member State;
• (ii) the central bank of a third country;
• (iii) financial customers;

• (d) any other liabilities and capital items or instruments not referred to in Articles 428l to 428o.

The following rules shall apply to the calculation referred to in the first subparagraph:

- (a) variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;

• (b) all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.

Article 428l

50 % available stable funding factor

The following liabilities and capital items or instruments shall be subject to a 50 % available stable funding factor:

• (a) deposits received that fulfil the criteria for operational deposits set out in the delegated act referred to in Article 460(1);

• (b) liabilities with a residual maturity of less than one year provided by:
• (i) the central government of a Member State or of a third country;
• (ii) regional governments or local authorities of a Member State or of a third country;
• (iii) public sector entities in a Member State or in a third country;
• (iv) multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
• (v) non-financial corporate customers;
• (vi) credit unions authorised by a competent authority, personal investment companies and clients that are deposit brokers to the extent that those liabilities do not fall under point (a) of this paragraph;

- (c) liabilities with a residual contractual maturity of a minimum of six months but less than one year that are provided by:

• (i) the ECB or the central bank of a Member State;
• (ii) the central bank of a third country;
• (iii) financial customers;

• (d) any other liabilities and capital items or instruments with a residual maturity of a minimum of six months but less than one year not referred to in Articles 428m, 428n and 428o.

Article 428m

90 % available stable funding factor

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for other retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 90 % available stable funding factor.

Article 428n

95 % available stable funding factor

Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for stable retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 95 % available stable funding factor.

Article 428o

100 % available stable funding factor

The following liabilities and capital items and instruments shall be subject to a 100 % available stable funding factor:

• (a) the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79;

• (b) the Additional Tier 1 items of the institution before the deduction of the items referred to in Article 56 and before Article 79 has been applied thereto, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;

• (c) the Tier 2 items of the institution before the deductions referred to in Article 66 and before the application of Article 79, having a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;

- (d) any other capital instruments of the institution with a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;

- (e) any other secured and unsecured borrowings and liabilities with a residual maturity of one year or more, including term deposits, unless otherwise specified in Articles 428k to 428n.

CHAPTER 4 Required stable funding

Section 1 General provisions

Article 428p

Calculation of the amount of required stable funding

Assets that institutions have borrowed, including in securities financing transactions, shall be subject to the required stable funding factors to be applied under Section 2 where those assets are not accounted for on the balance sheet of the institution but the institution does have beneficial ownership of the assets.

Assets that have less than six months remaining in the encumbrance period shall be subject to the required stable funding factors to be applied under Section 2 to the same assets if they were held unencumbered.

• (a) assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded, credit lines that are available to the institution; those assets shall include assets placed by a credit institution with a central institution in a cooperative network or institutional protection scheme; institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification pursuant to the delegated act referred to in Article 460(1), starting with assets ineligible for the liquidity buffer;

• (b) assets that the institution has received as collateral for credit risk mitigation purposes in secured lending, secured funding or collateral exchange transactions and that the institution may dispose of;

• (c) assets attached as non-mandatory overcollateralisation to a covered bond issuance.

• (a) by way of derogation from point (f) of Article 428ad and from point (a) of Article 428ah(1), assets encumbered for the purposes of the operations referred to in this subparagraph;

• (b) by way of derogation from points (d)(i) and (d)(ii) of Article 428ad, from point (b) of Article 428af and from point (c) of Article 428ag, monies that result from the operations referred to in this subparagraph.

Competent authorities shall determine, in agreement with the central bank that is the counterparty to the transaction the required stable funding factor to be applied to the assets referred to in points (a) and (b) of the first subparagraph. For encumbered assets as referred to in point (a) of the first subparagraph, the required stable funding factor to be applied shall not be lower than the required stable funding factor that would apply under Section 2 to those assets if they were held unencumbered.

When applying a reduced required stable funding factor in accordance with the second subparagraph, competent authorities shall closely monitor the impact of that reduced factor on institutions' stable funding positions and shall take appropriate supervisory measures where necessary.

10. Competent authorities may determine the required stable funding factors to be applied to off-balance-sheet exposures that are not referred to in this Chapter to ensure that institutions hold an appropriate amount of available stable funding for the portion of those exposures that are expected to require funding over the one-year horizon of the net stable funding ratio. To determine those factors, competent authorities shall, in particular, take into account the material reputational damage to the institution that could result from not providing that funding.

Competent authorities shall report the types of off-balance-sheet exposures for which they have determined the required stable funding factors to EBA at least once a year. They shall include an explanation of the methodology applied to determine those factors in that report.

Article 428q

Residual maturity of an asset

3. When calculating the residual maturity of an asset, institutions shall take options into account, based on the assumption that the issuer or counterparty will exercise any option to extend the maturity of an asset. For options that are exercisable at the discretion of the institution, the institution and competent authorities shall take into account reputational factors that may limit the institution's ability not to exercise the option, in particular markets' and clients' expectations that the institution should extend the maturity of certain assets at their maturity date.

4. In order to determine the required stable funding factors to be applied in accordance with Section 2, for amortising loans with a residual contractual maturity of one year or more, any portion that matures in less than six months and any portion that matures between six months and less than one year shall be treated as having a residual maturity of less than six months and between six months and less than one year, respectively.

Section 2 Required stable funding factors

Article 428r

0 % required stable funding factor

• (a) unencumbered assets that are eligible as level 1 high quality liquid assets pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, regardless of whether they comply with the operational requirements as set out in that delegated act;

• (b) unencumbered shares or units in CIUs that are eligible for a 0 % haircut for the calculation of the liquidity coverage ratio pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer set out in that delegated act;

• (c) all reserves held by the institution in the ECB or in the central bank of a Member State or the central bank of a third country, including required reserves and excess reserves;

• (d) all claims on the ECB, the central bank of a Member State or the central bank of a third country that have a residual maturity of less than six months;

• (e) trade date receivables arising from sales of financial instruments, foreign currencies or commodities that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or that have failed to settle but are nonetheless expected to settle;

• (f) assets that are categorised as being interdependent with liabilities in accordance with Article 428f;

• (g) monies due from securities financing transactions with financial customers, where those transactions have a residual maturity of less than six months, where those monies due are collateralised by assets that qualify as level 1 assets pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified therein, and where the institution would be legally entitled and operationally able to reuse those assets for the duration of the transaction.

Institutions shall take the monies due referred to in point (g) of the first subparagraph of this paragraph into account on a net basis where Article 428e applies.

2. By way of derogation from point (c) of paragraph 1, competent authorities may decide, with the agreement of the relevant central bank, to apply a higher required stable funding factor to required reserves, taking into account, in particular, the extent to which reserve requirements exist over a one-year horizon and therefore require associated stable funding.

For subsidiaries having their head office in a third country, where the required central bank reserves are subject to a higher required stable funding factor under the net stable funding requirement set out in the national law of that third country, that higher required stable funding factor shall be taken into account for consolidation purposes.

Article 428s

5 % required stable funding factor

• (a) unencumbered shares or units in CIUs that are eligible for a 5 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;

• (b) monies due from securities financing transactions with financial customers, where those transactions have a residual maturity of less than six months, other than those referred to in point (g) of Article 428r(1);

• (c) the undrawn portion of committed credit and liquidity facilities pursuant to the delegated act referred to in Article 460(1);

• (d) trade finance off-balance-sheet related products as referred to in Annex I with a residual maturity of less than six months.

Institutions shall take the monies due referred to in point (b) of the first subparagraph of this paragraph into account on a net basis where Article 428e applies.

Article 428t

7 % required stable funding factor

Unencumbered assets that are eligible as level 1 extremely high quality covered bonds pursuant to the delegated act referred to in Article 460(1) shall be subject to a 7 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428u

7,5 % required stable funding factor

Trade finance off-balance-sheet related products as referred to in Annex I with a residual maturity of at least six months but less than one year shall be subject to a 7,5 % required stable funding factor.

Article 428v

10 % required stable funding factor

The following assets and off-balance-sheet items shall be subject to a 10 % required stable funding factor:

• (a) monies due from transactions with financial customers that have a residual maturity of less than six months other than those referred to in point (g) of Article 428r(1) and in point (b) of Article 428s(1);

- (b) trade finance on-balance-sheet related products with a residual maturity of less than six months;

• (c) trade finance off-balance-sheet related products as referred to in Annex I with a residual maturity of one year or more.

Article 428w

12 % required stable funding factor

Unencumbered shares or units in CIUs that are eligible for a 12 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1) shall be subject to a 12 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428x

15 % required stable funding factor

Unencumbered assets that are eligible as level 2A assets pursuant to the delegated act referred to in Article 460(1) shall be subject to a 15 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428y

20 % required stable funding factor

Unencumbered shares or units in CIUs that are eligible for a 20 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1) shall be subject to a 20 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428z

25 % required stable funding factor

Unencumbered level 2B securitisations pursuant to the delegated act referred to in Article 460(1) shall be subject to a 25 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428aa

30 % required stable funding factor

The following assets shall be subject to a 30 % required stable funding factor:

- (a) unencumbered high quality covered bonds pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;

• (b) unencumbered shares or units in CIUs that are eligible for a 30 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428ab

35 % required stable funding factor

The following assets shall be subject to a 35 % required stable funding factor:

- (a) unencumbered level 2B securitisations pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;

• (b) unencumbered shares or units in CIUs that are eligible for a 35 % haircut for the calculation of the liquidity coverage ratio pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428ac

40 % required stable funding factor

Unencumbered shares or units in CIUs that are eligible for a 40 % haircut for the calculation of the liquidity coverage ratio pursuant to the delegated act referred to in Article 460(1) shall be subject to a 40 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.

Article 428ad

50 % required stable funding factor

The following assets shall be subject to a 50 % required stable funding factor:

• (a) unencumbered assets that are eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1), excluding level 2B securitisations and high quality covered bonds pursuant to that delegated act, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;

• (b) deposits held by the institution in another financial institution that fulfil the criteria for operational deposits as set out in the delegated act referred to in Article 460(1);