European Central Bank Decision Excluding Eurozone Central Bank Exposures from Total Exposure Measures

The European Central Bank has published a Decision in the Official Journal of the European Union temporarily excluding certain central bank exposures from significant Eurozone banks' leverage ratio calculations for the purposes of the EU Capital Requirements Regulation. The Decision will enter into force on September 26, 2020 and the exclusion will apply until June 27, 2021.

CRR implements the Basel Committee on Banking Supervision's Basel III framework into EU law. The Basel III framework includes a provision allowing jurisdictions to temporarily exempt central bank reserves from their leverage ratios (which are designed to assist in the measurement of risk-based capital requirements), in the case of exceptional macroeconomic circumstances. The revised CRR implemented this provision into EU law in 2019, but as originally drafted it is not applicable until June 28, 2021. In June 2020, the EU CRR "Quick Fix" Regulation came into force, amending certain provisions of CRR to help banks manage the COVID-19 crisis. The CRR Quick Fix package included a provision permitting banks, as of June 27, 2020, to exclude certain exposures to their central bank from the total exposure measure where the relevant national regulator had publicly declared exceptional circumstances existed that warranted the exclusion. In light of the ongoing tightening of financing conditions caused by COVID-19, the ECB has decided that, until June 27, 2021, certain Eurozone central bank exposures should be excluded from the total exposure measures of significant Eurozone banks that are directly supervised by the ECB. The relevant central bank exposures include: (i) coins and bank notes in the legal currency of the jurisdiction of the relevant central bank; and (ii) assets representing claims on the central bank, to the extent that these exposures are relevant for the transmission and implementation of monetary policy.

View the ECB's Decision.

View details of CRR II.

View details of the EU "Quick Fix" Regulation. 

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