On May 3, 2016, the EBA published an Opinion on the European Commission's intention not to endorse final draft Regulatory Technical Standards on additional collateral outflows, prepared under the Capital Requirements Regulation. The final draft RTS, submitted to the Commission in March 2014, set out the materiality and the measurement of additional collateral outflows resulting from the impact of an adverse market scenario on a firm's derivatives transactions, financing transactions and other contracts. The technical standards are also a component of the liquidity coverage ratio for which the final standards came into force at the end of 2015.
The EBA's final draft RTS include a historical look-back approach (known as HLBA) method for calculating additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on a firm's derivatives transactions, financing transactions and other contracts that was more conservative than that adopted by the Basel Committee on Banking Standards in April 2014. The European Commission, which delayed the assessment of the final draft RTS pending the adoption of the LCR RTS, requested the EBA to amend its final draft RTS on additional collateral outflows to align with the HBLA approach adopted by the Basel Committee on the basis that the liquidity outflows under the EBA's HBLA approach would be much higher for major players in the derivatives markets and that netting could be allowed as most collateral received by banks is in the form of cash or sovereign debt. The EBA agrees with the European Commission and has submitted revised final RTS to the Commission for endorsement.
The Opinion and revised RTS is available at: http://www.eba.europa.eu/documents/10180/1359456/EBA-Op-2016- 08+Opinion+on+additional+collateral+outflows.pdf.