Regulatory Alerts2021-07-29
Added · Updated
Circular Letter No. CC/2021/00000036
Bank of Portugal determines that exceptional circumstances exist for less significant credit institutions, allowing the temporary exclusion of certain central bank exposures from the leverage ratio exposure measure to facilitate monetary policy. This exemption applies to positions related to the Eurosystem's permanent deposit facility and reserve accounts, including minimum reserve requirements. The determination is effective from December 31, 2019, and the exemption period runs from June 28, 2021, to March 31, 2022.
Circular Letter No. CC/2021/00000036 Sent to: Credit Institutions. Mod. 40000375/T – 01/14 Subject: Determination of the existence of exceptional circumstances for the purposes of altering the calculation of the leverage ratio associated with the exclusion of exposures to central banks
Pursuant to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June ("Regulation (EU) No 575/2013"), as amended by Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020, it is permitted to temporarily exclude certain risk positions on central banks from the calculation of the leverage ratio exposure measure, when competent authorities determine that exceptional circumstances exist justifying this in order to facilitate the implementation of monetary policy.
In view of the COVID-19 pandemic, the European Central Bank, within the context of the Single Supervisory Mechanism, promoted the harmonized exercise of this option for the purposes of credit institutions covered by Council Regulation (EU) No 1024/2013 of 15 October 2013, through Decision (EU) 2021/1074 of the European Central Bank of 18 June 2021, with the purpose of establishing and applying a coherent prudential framework among significant credit institutions.
For the purposes of that Decision, the European Central Bank, in its monetary policy function, was consulted in accordance with Article 429a(5) of Regulation (EU) No 575/2013 regarding the determination of exceptional circumstances justifying the exclusion of certain risk positions and the date on which the exceptional circumstances are considered to have begun.
Less significant credit institutions must also benefit from the temporary flexibility of the rule for calculating the leverage ratio exposure measure, taking into account the determination of the existence of exceptional circumstances justifying this, thereby ensuring a coherent application of prudential conditions across the universe of national institutions.
The Bank of Portugal therefore resolved, on 27 July 2021, that less significant credit institutions may benefit from the determination of the existence of exceptional circumstances for the purposes of excluding risk positions on central banks from the calculation of the leverage ratio exposure measure, under the following terms:
a) In order to facilitate the implementation of monetary policy and for the purposes of Article 429a(5) of Regulation (EU) No 575/2013, exceptional circumstances exist that justify the exclusion of the risk positions on the central bank listed in sub-paragraphs i) and ii) of point n) of paragraph 1 of the aforementioned Article 429a from the total exposure measure; b) It is considered that the exceptional circumstances began on 31 December 2019; c) With regard to the risk positions listed in sub-paragraph ii) of point n) of paragraph 1 of Article 429a of Regulation (EU) No 575/2013, the determination applies to risk positions on Eurosystem central banks relating to deposits held in the permanent deposit facility or balances held in reserve accounts, including funds held to meet minimum reserve requirements; d) Point a) is applicable in the period between 28 June 2021 and 31 March 2022.
Mod. 40000375/T – 01/14 For the purposes of this Circular Letter, the definitions contained in Article 1 of Decision (EU) 2021/1074 of the European Central Bank shall apply, which takes effect the day following its publication.