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On 7 October the European Central Bank (ECB) published the results of the 2019 supervisory stress test on liquidity - LiST 2019 (PDF 372 KB). In conclusion, the vast majority of the 103 banks – directly supervised by the ECB – have adequate liquidity reserves to withstand stresses. Furthermore, about half of the participating banks reported the ability to survive without access to funding markets in more than six months under an adverse shock and more than four months under an extreme shock. Another key insight is that universal banks and global systemically important banks (G-SIBs) would generally be affected more severely than others by idiosyncratic liquidity shocks as they typically rely on less stable funding sources like wholesale and corporate deposits. Retail banks would be affected less strongly, given their more stable deposit base.

The results of LiST 2019 are being used in the 2019 Supervisory Review and Evaluation Processes (SREP) assessment by the JSTs. Notably, there is no direct impact of the LiST 2019 results on capital requirements, but the LiST 2019 results will be integrated in the Liquidity Adequacy Score of the institutions.

Detailed Results

Data Quality Issues - During the exercise significant data quality issues were revealed. On average, each bank faced eleven quality assurance requests. Additionally, on average 25% of data points were changed following ECB inquiries. As a result of LiST 2019, several banks re-stated their regulatory liquidity reports and made major changes in their regular regulatory reporting.


Overall Outflows - Banks reported an overall comfortable net liquidity position (NLP). Only four banks reported a survival period below six months in the baseline scenario. 51 banks reported a survival period longer than 6 months in the adverse shock (median of survival period for adverse scenario: 176 days). Only two banks reported a survival period shorter than two months under the extreme shock (median of survival period for extreme scenario: 122 days).

In general, universal banks and G-SIBs are hit the hardest while retail banks are relatively less affected. Custodian banks' pattern is affected by availability of large amounts of liquid assets which is part of their business model.


Counterbalancing Capacity (CBC) - The average CBC sums up to 23% of banks' total assets. Level 1 tradable assets and withdrawable central bank reserves account for the majority of the CBC. Collateral management strategies differ within the sample since smaller banks adopt a 'buy-and-hold-strategy', while larger banks refer to a 'more active collateral management' including repos and other secured financing transactions (SFTs).

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Rating Downgrade - The reported, net outflows triggered by a potential rating downgrade were generally below the ECB expectation. Interestingly, banks with recent downgrade experience tend to report a higher impact than banks without.


Foreign Currencies (FX) - Survival periods in FX are generally shorter than in Euro, which is reasonable as Euro area is the home funding market for the vast majority of banks. Several institutions report a negative USD or GBP NLP within the first 30 calendar days. Different banks' strategies are recognisable, like USD wholesale short term liabilities with limited USD liquidity buffer or systematically hedging USD liabilities with FX swaps without a USD denominated liquidity buffer.


Subsidiaries - Non-euro area subsidiaries have a shorter survival period than the euro area subsidiaries. This is mainly caused by lower liquidity buffers held by non-euro area subsidiaries and higher reliance on short term wholesale or intragroup funding. Euro area components are mostly the net provider of liquidity to the non-euro area subsidiaries.


Collateral - A significant heterogeneity can be observed within the sample which is caused by the difference in encumbrance levels and the low awareness for collateral of some banks. The average additional collateral, which could be generated out of unencumbered non-tradable assets, is 6% of the total assets within the following six months. Furthermore, banks have reported a relatively high amount of unencumbered Euro assets, whose eligibility regarding mobilisation is 'unknown'. Banks with a high proportion of assets with 'unknown' eligibility will be engaged by their JST to improve their mobilization capacity.


LCR - The ECB outlined that they often observed a liquidity drop after 30 calendar days - the 'cliff effect'. It indicates the usage of potential LCR optimisation strategies as it measures the difference between the NLP at day 30 and the NLP at day 35. Potential optimisation strategies, which were identified and will be prospectively subjective to supervisory follow-up activities, are collateral swaps to improve LCR as well as term deposits and securities maturing or having a notice period just beyond the LCR horizon.

Impact of the results

The results of LiST 2019 are being used in the 2019 Supervisory Review and Evaluation Processes (SREP) assessment by the JST. Notably, there is no direct impact of the LiST 2019 results on capital requirements, but the LiST 2019 survival period and potentially observed 'cliff effects' have an impact on the Liquidity Adequacy Score of the institutions. Based on the results of the SREP Liquidity Adequacy assessment, JSTs assessed the materiality of LiST 2019 risk drivers and addressed issues with appropriate quantitative and qualitative liquidity measures.