Risk Weight for the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF)

Basel Committee newsletter No 17
March 2014

The Basel Committee on Banking Supervision has agreed that supervisors may allow banks to apply a 0% risk weight to claims on the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF).  The ESM and EFSF will be included in the list of entities receiving a 0% risk weight set out in paragraph 56 of the document Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version, June 2006.  Claims on the ESM and EFSF will therefore also be included as Level 1 High Quality Liquid Assets (HQLA) in accordance with paragraph 50 (c) in Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools, January 2013.