Translation: Deutsche Bundesbank This translation is furnished for information purposes only. The orginal German text is binding in all respects.

After consultation with the central associations of the institutions and in liaison with the Deutsche Bundesbank, the Federal Ministry of Finance decrees, on the basis of section 11 (1) sentence 2 of the German Banking Act (Kreditwesengesetz), as amended by article 1 No 16 of the Act of 17 November 2006 (Federal Law Gazette I p 2606), the following:

Section 1
Scope of application

(1) ¹The present Regulation shall be applied to

1. credit institutions and

2. financial services institutions which

   1. trade for their own account or
   2. which are authorised as investment brokers, contract brokers or portfolio managers to obtain the ownership or possession of money or securities of customers or to trade in financial instruments for their own account.

²Only section 9 shall be applicable to e-money institutions.

(2) This Regulation shall not apply to branches within the meaning of section 53b (1) sentence 1 of the Banking Act if

1. the foreign supervisory authority responsible and the German Federal Financial Supervisory Authority (hereinafter: BaFin) have reached agreement on the mutual recognition of liquidity rules,
2. the branch is wholly integrated in the central office’s liquidity management,
3. the central office has declared in writing to BaFin that the branch’s liquidity is assured at all times, and
4. BaFin has confirmed in writing that the conditions pursuant to Nos 1 to 3 are given.

Section 2
Adequate liquidity

(1) ¹The liquidity of an institution shall be deemed to be adequate if the liquidity ratio to be calculated does not fall below the value of one. ²The liquidity ratio denotes the ratio between the liquid assets available in the first maturity band and the liabilities callable during this period. ³ Liquid assets and liabilities are to be assigned to one of the following maturity bands: due

1. on demand or up to one month (maturity band 1),
2. over one month and up to three months (maturity band 2),
3. over three months up to six months (maturity band 3),
4. over six months up to twelve months (maturity band 4).

(2) ¹The institution shall calculate observation ratios which give the ratio between the respective liquid assets and the liabilities in the individual maturity bands referred to in (1) sentence 3 Nos 2 to 4 . ²The observation ratios are calculated in the same way as the liquidity ratio pursuant to (1) sentence 2. ³If the liquid assets in one maturity band exceed the callable liabilities, the difference shall be recognised as additional liquid assets in the calculation of the observation ratio in the next-higher maturity band.

Section 3
Liquid assets

(1) Subject to (3), the following shall be slotted into maturity band 1 as liquid assets:

1. cash,
2. balances with central banks,
3. paper for collection,
4. irrevocable lending commitments received by the institution from another credit institution or the Reconstruction Loan Corporation (Kreditanstalt für Wiederaufbau, KfW),
5. securities which are not treated as fixed assets and are admitted for trading on a regulated market as defined in Article 4 (1) No 14 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments, amending Directives 85/611/EEC and 93/6/EEC of the Council and Directive 2000/12/EC of the European Parliament and of the Council and repealing Directive 93/22/EEC of the Council (OJ EU L 145 p 1), last amended by Directive 2006/31/EC of the European Parliament and of the Council of 5 April 206 (OJ EU L 114 p 60) in a country of the European Economic Area or on a stock exchange pursuant to section 1 (3e) of the Banking Act (listed securities), including paper transferred to the institution as a transferee or borrower under repurchase or lending agreements,
6. those assets recognised by the European Central Bank or the central bank of a country the unsecured liabilities of which would receive a Credit Risk Standardised Approach (CRSA) weighting of 0 per cent pursuant to section 26 Nos 1 or 2 of the Solvency Regulation (Solvabilitätsverordnung, SolvV) in the relevant listing as collateral eligible for refinancing; the credit institution must have a branch in the country of domicile of the central bank if that central bank does not belong to the European System of Central Banks; included are also those assets transferred to the institution as a transferee or borrower under repurchase or lending agreements, where these have not already been recorded pursuant to No 5 (for zero-rated central banks, assets eligible for refinancing),
7. collateralised debt securities not treated as fixed assets within the meaning of section 20a of the Banking Act, including collateralised debt securities transferred to the institution as a transferee or borrower under repurchase or lending agreements, and
8. shares, not treated as fixed assets, in the amount of 90 per cent of the respective repurchase prices in the following funds: Directive-compliant funds pursuant to sections 46 to 65 of the Investment Act (Investmentgesetz); special funds pursuant to sections 91 to 95 of the Investment Act, the contractual terms of which provide for investment principles and limits corresponding to those of Directive-compliant funds pursuant to sections 46 to 65 of the Investment Act; and EU investment units pursuant to section 2 (10) of the Investment Act, provided that the repurchase and settlement arrangements for units in foreign funds are the same as for units in the abovementioned domestic funds.

(2) The following liquid assets are to be recorded in maturity bands 1 to 4 according to their residual maturities but subject to section 3:

1. loans and advances to central banks
2. loans and advances to credit institutions,
3. loans and advances to customers,
4. bills of exchange eligible for refinancing with central banks which do not already fall under Nos 2 or 3,
5. asset claims of the lending institution to the return of the securities lent,
6. debt securities other than those included under (1) and other fixed-interest securities including fixed-interest securities transferred to the institution as a transferee or borrower under repurchase or lending agreements,
7. asset claims of the transferor to the retransfer of securities under genuine sale and repurchase agreements,
8. money claims of the transferee arising from sales with an option to repurchase in the amount to be repaid, provided that the current market value of the securities transferred is lower than the agreed amount to be repaid, and
9. equalisation claims on the public sector (especially Currency Conversion Equalisation Fund) including debt securities arising from their exchange where they are not included in (1) No 5,

provided that the respective residual maturities on the reporting date do not exceed one year.

(3) The following are not liquid assets within the meaning of (1) and (2):

1. loans and bills of exchange for which individual value adjustments have been made, provided that they are currently impaired,
2. participating interests and shares in affiliated companies,
3. repurchased own-debt securities which fail to meet the provisions of section 20a of the Banking Act,
4. securities transferred under repurchase or lending agreements, for the duration of the agreement on the part of the transferor or lender,
5. securities pledged as collateral and not available to the institution for the period they constitute collateral, unless they are pledged to a central bank of the European System of Central Banks, and
6. investment units other than listed in (1) No 8, where they are not included in (1) No 5 as liquid assets.

Section 4
Liabilities

(1) The following are to be recorded in maturity band 1 as liabilities:

1. 40 per cent of the liabilities to credit institutions due on demand,
2. 10 per cent of the liabilities to customers due on demand,
3. 10 per cent of savings deposits within the meaning of section 21 (4) of the Bank Accounting Regulation,
4. 5 per cent of the contingent liabilities from rediscounted bills,
5. 5 per cent of the contingent liabilities from guarantees and indemnity agreements
6. 5 per cent of the amount of liability from the pledging of collateral for third-party liabilities,
7. 20 per cent of placement and underwriting commitments and
8. 20 per cent of undrawn, irrevocable lending commitments, other than those to be included as provided in (2) No 12 or (3).

(2) The following liabilities are to be recorded in maturity bands 1 to 4 according to their residual maturities:

1. liabilities to a central bank
2. liabilities to credit institutions, unless they constitute liabilities to be included in number 3,
3. 20 per cent of the liabilities of the central institutions of the savings banks and credit cooperative sectors to their regional institutions and of those regional institutions to their affiliated savings banks and credit cooperatives,
4. liabilities to customers, unless they constitute liabilities to be included in number 12,
5. asset liabilities, ie obligations of the borrowing institution to return borrowed securities,
6. asset liabilities, ie liabilities of the transferee resulting from the obligation to return securities under repurchase agreements,
7. money liabilities of the transferor arising from sales with an option to repurchase, provided that the current market value of the securities transferred is lower than the agreed amount to be repaid,
8. securitised liabilities,
9. subordinated liabilities,
10. capital represented by participation rights
11. other liabilities and
12. 20 per cent of the undrawn eligible liquidity facilities within the meaning of section 230 (2) of the Solvency Regulation which cannot be terminated unconditionally at any time without notice if a drawing between the refinancing dates for the securitisation transaction is ruled out.

if the respective residual maturities on the reporting date do not exceed one year.

(3) Irrevocable lending commitments for investment loans and loans secured by mortgages, to be disbursed in line with the progress of construction, which are expected to be used during the 12 months following the reporting date are to be recorded as follows:

1. 12 per cent in maturity band 1,
2. 16 per cent in maturity band 2,
3. 24 per cent in maturity band 3, and
4. 48 per cent in maturity band 4.

Section 5
Securities repurchase and lending agreements

(1) ¹Securities transferred under genuine sale and repurchase agreements shall be deemed to be part of the portfolio of the transferee, who must include a resulting asset liability obligation to return the securities. ² The transferee shall recognise a money claim on the transferor in the amount of the agreed repayment. ³The transferor shall, instead of the securities, record an asset claim to the return of the securities. ⁴It shall include a money liability in the amount of the agreed repurchase price to the transferee.

(2) ¹Securities acquired by the transferee under sales with an option to repurchase shall be deducted from the portfolio of the transferor, who shall recognise instead the money received from the transferee. ²The transferee shall, instead of the money paid, count the securities towards its holding. ³If the market price of the transferred securities is below the amount of the agreed repurchase price,

1. the securities transferred shall be counted towards the holding of the transferor, who shall recognise a money liability to the transferee in the amount of the agreed repurchase price, and
2. a money claim on the transferor in the amount of the agreed repurchase price shall be included by the transferee, who shall deduct the securities from its holding.

(3) ¹Securities transferred under lending agreements shall be deducted from the holding of the lender and counted towards the portfolio of the borrower. ² The borrower shall recognise an asset liability obligation to return the securities, the counterpart of which is an asset claim of the lender in the same amount.

Section 6
Basis of assessment

(1) ¹Below is the respective basis of assessment for the various items:

1. for liquid assets pursuant to section 3 (1) Nos 5 and 7: the respective marked-to-market prices of the underlying securities.
2. for liquid assets pursuant to section 3 (1) No 6: the figures for the underlying assets as derived using the relevant valuation principles by the central bank concerned less the central bank’s haircut.
3. for liquid assets within the meaning of section 3 (1) No 8: the repurchase prices,
4. for liquid assets pursuant to section 3 (2) No 8 and liabilities pursuant to section 4 (2) Nos 7 to 9: the repayment amounts,
5. for securities items and securities-related asset claims and liabilities under repurchase and lending agreements: the respective market prices of the securities marked to market,
6. for other liquid assets and liabilities: the respective book values.

² Market prices are the official prices on a given reporting date or, if unavailable, the market prices established by the institution. ³If the securities are officially listed on several markets, an institution shall use market prices according to a method set internally by that institution; the method is to be uniform and permanent and documented. ⁴The institution is to document, and submit to BaFin upon request, its derivation of market prices for the most recent reporting date, the reporting dates of the last 24 months and for the current reporting period. ⁵ Except for liquid assets pursuant to sentence 1 No 2 , debt securities and other fixed-interest securities in the portfolio may be reported at 90 per cent of their book value, and listed shares and other variable-rate securities in the portfolio at 80 per cent of their book value, unless the institution uses the mark-to-market method. ⁶Country risk value adjustments, general value adjustments and individual value adjustments shall be deducted from the book values of the asset items unless they prevent the asset items referred to in section 3 (3) 1 from being recognised.

(2) ¹If an institution is not able for technical reporting reasons to deduct value adjustments from the asset items concerned it may use a simplified procedure to deduct the value adjustments. ²In this procedure, and in line with the proportion of recognisable liquidity items in the total of all assets for which the value adjustments are made, the value adjustments set up are to be deducted from the liquid assets

1. in maturity band 1 (standardised procedure) or
2. in all maturity bands (alternative procedure)

³If an institution decides to use the alternative procedure, it shall include when deducting the value adjustments the maturity structure underlying the liquid assets. ⁴Value adjustments to specific assets which make claims and bills ineligible for recognition may be left out of the calculation. ⁵Institutions which intend to use the simplified procedure must notify BaFin and the Deutsche Bundesbank before using it for the first time. ⁶The notification is to state the value adjustments for which the procedure is to be used and what assets are to be included. ⁷BaFin can prohibit use of the simplified procedure if there is justified reason to believe that the liquidity-restricting effects resulting from value adjustments would not be adequately replicated.

(3) Section 5 of the Solvency Regulation applies mutatis mutandis for converting forexdenominated asset and liability items.

Section 7
Residual maturities

¹The residual maturity is deemed to be

1. the period of time between the respective reporting date and the due date of the respective liquid assets and liabilities, subject to Nos 2 to 6,
2. for uncalled deposits at notice: the respective period of notice plus a non-calling period,
3. for assets and liabilities to be redeemed in regular instalments, regardless of whether the partial amounts contain interest or not: the period between the respective reporting date and the maturity date of the partial amount,
4. for asset claims from genuine securities repurchase agreements and lending transactions within the meaning of section 3 (1) and the resulting liabilities and securities items of the transferor arising from sales with an option to repurchase: the residual duration of the agreement,
5. for asset claims arising from genuine repurchase and lending agreements involving securities other than those under No 4, and for consequent asset liabilities and transferor securities items arising from sales with an option to repurchase: the residual duration of the transaction plus the residual maturities of the securities at the end of the transaction, and
6. for money claims and liabilities arising from genuine sales and repurchase agreements and sales with an option to repurchase: the residual transaction maturity.

² Early termination options shall be recognised for liabilities. ³However, they shall not be recognised for claims and securities in a holding. ⁴In the case of assets and liabilities which are redeemed in regular instalments, the amounts to be repaid shall be assigned to the relevant maturity bands up to the value of the respective instalments. ⁵Overnight money and call money shall not be considered to be due on demand. ⁶They are to be treated as time deposits for one day.

Section 8
Rules specific to building and loan associations

¹In derogation from sections 3 to 7, building and loan associations must count 10 per cent of the book value of the difference between deposits under "savings and loan" contracts and the loans under "savings and loan" contracts towards liabilities under section 4 (1) in maturity band 1. ²The liquid assets and liabilities arising from the noncollective business of building and loan associations shall be recognised pursuant to the provisions laid down in sections 3 to 7.

Section 9
Investment limitations for electronic money institutions

(1) ¹E-money institutions shall invest funds in at least the amount of their liabilities arising from the as yet undrawn electronic money only in the following assets:

1. Cash and equivalent items,
2. Assets, the performance of which is owed or expressly guaranteed by a central government or central bank, provided that the Credit Risk Standardised Approach (CRSA) risk weighting for uncollateralised liabilities owed by that central government or central bank pursuant to section 26 Nos 1 to 3 of the Solvency Regulation is no higher than 0 per cent,
3. Assets, the performance of which is owed or expressly guaranteed by the European Communities,
4. Assets, the performance of which is owed or expressly guaranteed by one of the counterparties named in section 25 (3) Nos 1 to 4 of the Solvency Regulation,
5. Assets which are demonstrably secured by collateral in the form of debt securities of a counterparty named in section 25 (3) Nos 1 to 4 of the Solvency Regulation,
6. Sight deposits at credit institutions, the owed unsecured liabilities of which receive a maximum CRSA risk weighting of 20 per cent pursuant to section 31 Nos 1 or 2 of the Solvency Regulation, and
7. High-quality securities under section 303 (3) sentence 2 of the Solvency Regulation, which are not included in Nos 2 to 5 and are not issued by companies which hold a significant interest pursuant to section 1 (9) of the German Banking Act in an e-money institution or which are to be included in the consolidated accounts of such companies.

²The assets named in sentence 1 are not to be rated as fixed assets. ³The assets named in sentence 1 Nos 2 to 5 and 7 must be sufficiently liquid. ⁴The investments named in sentence 1 Nos 6 and 7 may not, in total, exceed 20 times the own funds of a given e-money institution. ⁵Any overshoot is to be notified immediately to BaFin and The Deutsche Bundesbank.

(2) ¹If owing to the undrawn electronic money the value of the assets named in (1) fall short of the level of liabilities, the e-money institution shall be obligated to terminate the shortfall without delay. ²To that end, BaFin may temporarily permit the lower of the following figures to be covered by assets other than those specified in (1):

1. a maximum of 5 per cent of the liabilities deriving from electronic money as yet undrawn, or
2. own funds

(3) ¹E-money institutions shall submit reports to the Deutsche Bundesbank on the requirements under (1) as at the reporting date at the end of a calendar half-year using the form in annex 1; the submission is to be made by the 15th business day of the month following the reporting date. ²The report is to be submitted electronically. ³The Deutsche Bundesbank publishes on the internet the format to be used for electronic data submission and the submission procedure. ⁴It forwards reports to BaFin.

Section 10
Utilisation of internal liquidity risk and measurement procedures

(1) ¹To assess the adequacy of liquidity, the institution may, at its discretion on a permanent basis and with the assent of BaFin, use its own liquidity risk measurement and management procedure in place of sections 2 to 8, if the requirements under (3) have been met and if BaFin has confirmed in writing its suitability for the purposes of this regulation, upon application from the institution concerned. ²BaFin can make its assent contingent upon collateral clauses, especially conditions, and revoke assent already granted if the institution no longer meets the preconditions of (3).

(2) ¹The suitability of an internal liquidity risk measurement and management procedure is assessed on the basis of an examination under section 44 (1) sentence 2 of the Banking Act conducted by BaFin in cooperation with the Deutsche Bundesbank; once the suitability has been officially confirmed, it is reviewed in follow-up examinations. ²Material changes to the liquidity risk measurement and management procedure shall necessitate renewed confirmation of suitability under (1).

(3) ¹The institution shall in particular meet the following requirements for the use of an internal liquidity risk measurement and management procedure:

1. ¹The liquidity risk measurement and management procedure guarantees (while taking into account the situation specific to a given institution, the type and complexity of business and the size of the institution), adequate ongoing calculation and monitoring of the liquidity risk and describes the liquidity situation more incisively and appropriately than if sections 2 to 8 were applied. ²In particular, the liquidity risk measurement and managment procedure is to convey information about expected shortterm net outflows of funds, the possibility of unsecured borrowing and the effect of stress scenarios. ³The institution shall regularly review compliance with the requirements under sentence 1.
2. ¹The institution has set limits (appropriate quantitative ceilings for liquidity risks, including those in stress scenarios) which it reviews at regular intervals; the limits shall have been set on the basis of the liquidity risk measurement and management procedure. ²To that end, the institution identifies ratios in its liquidity risk measurement procedure which are especially suited to providing an aggregate picture of the risk of insufficient liquidity; the institution documents what level these indicators must reach for it to deem itself exposed to tangible, medium and high risk of insufficient liquidity, and what measures are triggered when one of the ratios hits one of the specified risk levels.
3. ¹The institution shall notify the Deutsche Bundesbank and BaFin immediately in writing if one of the ratios under No 2 exceeds the level for a medium or high risk of insufficient liquidity; it shall report on measures it has adopted, as well as those it intends to adopt, to avert the danger. ²The foregoing shall be without prejudice to reporting of the ratios pursuant to section 11 below.
4. The liquidity risk measurement and management procedure and the internal limit system are used for internal liquidity risk management and in the institution’s corporate governance.

(4) ¹An institution domiciled in Germany which is a subordinate enterprise in a group of institutions or a financial holding group, and which meets the provisions laid down in section 2a (1) Nos 1 to 5 of the Banking Act, or which is a parent company and meets the provisions laid down in section 2a (6) sentence 1 Nos 1 and 2 of the Banking Act may, at its discretion on a permanent basis and with the permission of BaFin, refrain from applying sections 2 to 8 if the group of institutions or financial holding group to which the institution belongs uses an internal liquidity risk measurement and management system and BaFin has confirmed the suitability of that system in writing. ²(1) to (3) shall apply mutatis mutandis.

Section 11
Reporting of the ratios

(1) ¹Institutions shall submit reports to the Deutsche Bundesbank on the requirements under section 2 as at the reporting date at the end of a month, using the forms in annexes 2 and 3; the submission is to to be made by the 15th business day of the month following the reporting date. ²Upon application from an institution, BaFin may approve an extension of the deadline. ³For guarantee banks and credit guarantee associations, sentence 1 applies with the proviso that the reports are to be submitted only twice a year on the status as at the reporting date at end-May and end-November, in each case by the 15th business day of the month following the reporting date.

(2) If an institution exercises the option of using an internal liquidity risk measurement and management procedure pursuant to section 10, BaFin shall, in derogation from (1), define, on a case-by-case basis, the content and form of the monthly reporting requirements in its written confirmation of the suitability of the liquidity risk measurement and management procedure under section 10.

(3) ¹The reports pursuant to (1) and (2) are to be submitted electronically. ²The Deutsche Bundesbank publishes on the internet the format to be used for electronic data submission pursuant to (1) and the submission procedure. ³It forwards the reports to BaFin. ⁴Institutions shall keep the reports under annexes 2 and 3 for the current calendar year and the two preceding calendar years.

Section 12
Transitional provision

Until 1 January 2008, an institution which is not an e-money institution and is using the transitional provision defined in section 339 (9) or (10) of the Solvency Regulation may, in derogation from the present regulation, apply the requirements of Principle II contained in the "Announcement of the amendment of the Principles concerning the Own Funds and Liquidity of Institutions of November 25, 1998" (Federal Gazette, p 16 985) (Principle II).

Section 13
Entry into force

This regulation will enter into force on 1 January 2007.

[....]

*) Section 9 of this regulation is aimed at transposing articles 5 and 6 of Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions into German national law (OJ EU L 275 p 39).