Recital 5

(5)The discretion granted to competent authorities under Article 428p(10) of Regulation (EU) No 575/2013 of the European Parliament and of the Council ⁵ in connection with the net stable funding ratio (NSFR) requirement, according to which competent authorities may determine the required stable funding factors to be applied to off-balance-sheet exposures that are not referred to elsewhere in Chapter 4 of Title IV of Part Six of that Regulation, should be exercised in a consistent manner for both significant and less significant institutions. The policy in relation to significant institutions links the required stable funding factors in the NSFR to the outflow rates applied in the liquidity coverage ratio (LCR), while leaving flexibility for the ECB to determine different required stable funding factors. This approach strikes a balance, for the sake of simplicity and prudence, between aligning the factors to be applied in the calculation of the NSFR with the factors determined for the purposes of the LCR, while still allowing for a different treatment in cases where this linking would not properly reflect the associated funding risk. It is not necessary or appropriate to deviate from that approach in relation to less significant institutions, as the methodology for applying required stable funding factors to these off-balance-sheet exposures should not, in principle, vary across credit institutions. For the same reason, the discretion granted to competent authorities pursuant to Article 428aq(10) of Regulation (EU) No 575/2013 in connection with the NSFR calculated according to the simplified approach should be exercised in a similar manner.