EBA · 2013_474 Final Q&A

Treatment of collateral posted from client to clearing Member in Large Exposures

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
4, 305, 306, 390, para. 1, 2, 2
Topic
Large exposures
Submitted by
Industry association
Submitted
2013-11-01
Answered
2014-03-28
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Does Article 390(1) of Regulation (EU) No 575/2013 (CRR) include collateral posted from client to clearing member?

Background

If so, posted collateral could receive an exposure value of 0 (Article 306 (2) CRR) for the purposes of large exposures, provided that all of the pre-conditions of Articles 305(2) and 306(2) are fulfilled. Please note, that otherwise there is a risk of exceeding the LE-Limit of Article 395 (1) CRR, since collateral claims of a CCP have to meet, regardless of any limits and CCP related trade exposures of a client are not an exemption according to Article 400 of CRR.

Answer

Trade exposures, as defined in Article 4(1)(91) of Regulation (EU) No. 575/2013 (CRR), include the current and potential future exposures of clients and clearing members to CCPs arising from contracts listed in Annex II of CRR, credit derivatives and transactions listed in points (b) to (e) of Article 301(1) of the CRR. Trade exposures also include the collateral posted by clients and clearing members to CCPs. For large exposure purposes, trade exposures, including those arising from posted collateral, are exempted from the application of Article 395(1) of the CRR in accordance with Article 400(1)(j). For solvency purposes - when clients calculate the own funds requirements for trade exposures, and provided the conditions set out in Article 305(2) of the CRR are met, the exposure value of assets posted as collateral may be reduced to zero in accordance with Article 306(2), provided that these assets are bankruptcy remote in the event of the CCP, clearing member or any other clients of the clearing members defaulting.

Original source: European Banking Authority, Q&A ID 2013_474

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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