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Application provision

1.1 This Part applies to a CRR firm.

12.1

01/10/2015

A firm must adjust its strategies, internal policies and limits on liquidity risk and funding risk and develop an effective liquidity contingency plan, taking into account the outcome of the alternative scenarios referred to in 11.2.

Additional Notes


[Note: Art. 86(10) of the CRD]

12.2

01/10/2015

The liquidity contingency plan must include strategies to address the contingent encumbrance resulting from relevant stress events including downgrades in the firm’s credit rating, devaluation of pledged assets and increases in margin requirements.

12.3

01/10/2015

The liquidity contingency plan must also set out adequate strategies and proper implementation measures in order to address possible liquidity shortfalls, including in relation to branches established in another EEA State. Those plans must be tested at least annually, updated on the basis of the outcome of the alternative scenarios set out in 11.2, and be reported to and approved by the firm's senior management, so that internal policies and processes can be adjusted accordingly.

Additional Notes


[Note: Art. 86(11) (part) of the CRD]

12.4

01/10/2015

A firm must take the necessary operational steps in advance to ensure that liquidity contingency plans can be implemented immediately, including holding collateral immediately available for central bank funding. This includes holding collateral where necessary in the currency of another EEA State or currency of a third country to which the firm has exposures, and where operationally necessary within the territory of an EEA State or third country to whose currency it is exposed.

Additional Notes


[Note: Art. 86(11) (part) of the CRD]