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Additional liquidity requirements (LCR add-ons) – This measure expired on 31 December 2018


On 13 November 2017, the Central Bank of Cyprus (CBC), in accordance with the powers vested in it by the provisions of article 3(1) of the Macroprudential Oversight of Institutions Law, 6(I) 2015, as the designated authority of Cyprus for the implementation of article 458 of the Capital Requirements Regulation (CRR) of the EU, decided to adopt a national macroprudential measure. Under this measure, it is required to maintain additional liquidity for those credit institutions operating in the domestic market and for which the CBC considers that the risks they face are significantly affected by the conditions in the domestic economy1. The implementation of the measure was finalised on 21 December 2017 with the successful completion of the procedures set out in article 5 of the Single Supervisory Mechanism Regulation and article 458 of the CRR.

This macroprudential measure aims at managing the significant excess liquidity that arose due to the differences between the national prudential liquidity requirements that were abolished on 31 December 2017, as required under the provisions of article 412 of the CRR, and the 100% of the Liquidity Coverage Ratio (i.e. the fully phased-in LCR) that must be maintained in accordance with the provisions of article 460 of the CRR. The design of the macroprudential measure provides for a gradual release of the excess liquidity that arose due to differences between the national prudential liquidity requirements that were abolished and the 100% of the Liquidity Coverage Ratio (i.e. the fully phased-in LCR). This will be achieved by a 50% reduction of the LCR add-on rates on 1 July 2018 and their complete abolition on 31 December 2018.

This national macroprudential measure comprises:

a) additional liquidity requirements in the form of add-on rates on some of the parameters used in the calculation of the Liquidity Coverage Ratio (LCR), defined in the Commission’s Delegated Regulation (EU) 2015/61; and

b) additional liquidity requirements in the form of add-on rates on some deposit categories that are used in the calculation of this ratio.

The elements constituting the additional liquidity requirements and the relevant parameters, are set out in this file.

This macroprudential measure is of a temporary nature, with a duration of one year, and was implemented on 1 January 2018.

As a result of this measure, credit institutions that are established in Cyprus must maintain during 2018:

a) 100% of the Liquidity Coverage Ratio (i.e. the fully phased-in LCR), in accordance with article 460 of the CRR, that applies to all EU credit institutions; and

b) the additional liquidity requirement (LCR add-ons) that must be met in accordance with this national macroprudential measure.

The measure adopted by the Central Bank of Cyprus expired on 31 December 2018.

 


1 As a result, the measure applies to all credit institutions established in Cyprus, other than RCB Bank Ltd.