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

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.