Communication of 10 November 2020: Exclusion of certain exposures to central banks from the leverage ratio calculation in light of the COVID-19 pandemic - Exercise of discretion for less significant banks

Communication of 10 November 2020. Exclusion of certain exposures to central banks from the calculation of the leverage ratio in light of the COVID-19 pandemic - Exercise of discretion for less significant banks.

Regulation (EU) No 2020/873 (the so-called CRR "Quick fix") introduced modifications and additions to Regulation (EU) No 575/2013 (CRR) to contain the impacts of the COVID-19 health emergency on the economic and financial system. With reference to the leverage ratio discipline, Article 500-ter of the CRR, introduced by the CRR "Quick fix", allows banks to exclude, until 27 June 2021, from the measure of total exposure, exposures to the central bank represented by: a) coins and banknotes that constitute legal tender in the country of the central bank; and b) assets that represent claims against the central bank, including reserves held at the central bank, if the competent authority has established, after consultation with the relevant central bank, and publicly declared the existence of exceptional circumstances justifying the exclusion in order to facilitate the implementation of monetary policies.

On 17 September 2020, the European Central Bank (ECB), in its capacity as central bank, declared that the impacts of the COVID-19 pandemic on the euro area economy required significant monetary policy accommodations, which in turn require the proper functioning of the monetary policy transmission channel represented by the banking system (1). The ECB Governing Council therefore confirmed, for the euro area, the existence of exceptional circumstances for the exclusion of exposures to the central bank from the calculation of the leverage ratio indicator.

Taking into account what was declared by the ECB, with this communication the Bank of Italy establishes and publicly declares the existence of exceptional circumstances justifying the exclusion, until 27 June 2021 (2), of the exposures to the central bank referred to in points a) and b) of Article 500-ter, paragraph 1, CRR from the measure of total exposure for the calculation of the leverage ratio indicator in order to facilitate the implementation of monetary policies.

The exclusion of the exposures referred to in point b) of Article 500-ter, paragraph 1, CRR applies to exposures to the central banks of the Eurosystem referred to in Decision (EU) 1306/2020 of the European Central Bank, Article 2, paragraph 2 (3).

Given the context of necessity and urgency and taking into account that the granting of the exemption does not result in additional costs for operators, the Bank of Italy did not conduct a public consultation nor an impact analysis (4).

This communication has the nature of a binding general regulatory act for less significant banks and banking groups and enters into force the day following its publication on the website of the Bank of Italy.

1 See Communication of the ECB Governing Council of 17 September 2020; https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200917~f3f03398d2.en.html.
2 Banks will be required to comply with a minimum leverage ratio requirement from 28 June 2021 (Pillar 1 requirement), as provided for in the CRR as amended by Regulation (EU) No 876/2019 (so-called CRR2). From this date onwards, the issuance of a new decision by the Bank of Italy will be necessary to exempt exposures to central banks.
3 Exposures to the central banks of the Eurosystem relating to deposits held in deposit operations at the central bank (deposit facility) or balances held in reserve accounts, including funds held in order to satisfy the minimum reserve requirement. See Decision (EU) 2020/1306 of the European Central Bank; https://eur-lex.europa.eu/legal-content/IT/TXT/PDF/?uri=CELEX:32020D1306&from=EN 4 See Article 8, paragraph 1, of the Measure of 9 July 2019 "Regulation concerning the discipline for the adoption of acts of a regulatory nature or of general content by the Bank of Italy in the exercise of supervisory functions, pursuant to Article 23 of Law No 262 of 28 December 2005