European Commission call for evidence on amending net stable funding ratio treatment of securities financing transactions under CRR

The European Commission (EC) has published a call for evidence on targeted amendments to the Capital Requirements Regulation (CRR) to adjust the prudential treatment of securities financing transactions (SFTs) under the net stable funding ratio (NSFR).

Under Article 510(8) of the CRR, until 28 June 2025, EU credit institutions can apply lower required stable funding (RSF) factors for SFTs and unsecured transactions with a residual maturity of less than six months than those set out under the Basel standards. Under Article 510(7) of the CRR, the EC has the power to adopt a legislative proposal to amend provisions in the CRR on the treatment of these instruments under the NSFR. The targeted amendments therefore aim to make permanent the current transitory prudential treatment for SFTs and unsecured transactions with a residual maturity of less than six months, with financial customers, for the purpose of the NSFR (i.e. to extend the current treatment also beyond 28 June 2025, and permanently). The EC is proposing to make this treatment permanent on the basis that the higher RSF factors that would otherwise apply would make these instruments more costly in the EU and would consequently harm the demand for collateral and the liquidity in the collateral markets. The EC is also responding to concerns that the decisions of the U.S. and the U.K. to maintain lower RSF factors than under the Basel standards for these instruments on a permanent basis may lead to a loss of competitiveness for EU banks. The deadline for responses to the call for evidence is 10 March 2025.

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