The Regulation on the liquidity of institutions (Liquidity Regulation; Liquiditätsverordnung – LiqV) entered into force on 1 January 2007, superseding Principle II on the liquidity of institutions previously in force. The Liquidity Regulation gives concrete shape to the provisions of Section 11(1) sentence 1 and Section 51b(1) sentence 1 of the German Banking Act (Kreditwesengesetz), which require institutions and housing undertakings with a saving facility to have sufficient liquidity at all times.

Following the full introduction of the liquidity coverage ratio (LCR) for CRR institutions on 1 January 2018, the Liquidity Regulation applied only to institutions which are not subject to the provisions of Articles 411 to 428 of the CRR. These included guarantee banks, housing enterprises with a savings facility and certain CRR investment firms. When the European prudential framework for investment firms became applicable, said CRR investment firms became subject to the liquidity provisions of Regulation (EU) 2019/2033 on the prudential requirements of investment firms. Consequently, the Liquidity Regulation was amended by Article 7(41) of the Act Implementing Directive (EU) 2019/2034 on the prudential supervision of investment firms of 12 May 2021, and investment firms were also removed from the scope of application of the Liquidity Regulation.

A credit institution’s liquidity is sufficient pursuant to the Liquidity Regulation if the funds available for the next month (maturity band 1) at least cover the expected cash outflows during that period. The liquidity ratio, i.e. the quotient of available funds and callable payment obligations, must therefore at least be equal to one and must be fulfilled at all times. In addition, for maturity bands of up to one year, liquidity flows and three related observation ratios must be calculated and reported.

Reports pursuant to the Liquidity Regulation (forms LV1 and LV2) are generally to be made on a monthly basis at the end of the month and must be submitted to the Bundesbank by the 15th business day of the month following the reporting reference date.