asset encumbrance

EBA Report on Asset Encumbrance: September 2015

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On October 1, 2015, the European Banking Authority (EBA) published its first report analyzing asset encumbrance in EU banks.

The aim of the report is to monitor the extent of and the changes in the levels of asset encumbrance at an EU level and the sources for asset encumbrance. The report is based on data reported in December 2014 and March 2015 in accordance with the implementing technical standards on asset encumbrance reporting contained in European Commission Implementing Regulation 2015/79.

The EBA found there was no indication of a general increase in the level of asset encumbrance across EU banks in recent years, based on a comparison with a similar analysis performed by the European Systemic Risk Board in 2011. In March 2015, the overall weighted average encumbrance ratio was 27%, with a wide dispersion across institutions and countries.

FSA Proposed Guidance on Liquidity Swaps

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On July 21, the FSA issued proposed guidance on liquidity swaps, requiring firms participating in such transactions to inform the FSA before execution under PRIN 11. The proposed guidance also provides the basis of the FSA’s Pillar 2 assessment of liquidity swap transactions, including: (i) assessing the risk management systems of the firms engaging in the transaction; (ii) the exit strategy of a firm in the event of a counterparty default; and (iii) the level of asset encumbrance resulting from the liquidity swap. Comments must be submitted by September 21. FSA Release. FSA Proposed Guidance.