Repo conducted with a non-financial customer

Question

Article 425 subparagraph 2(a) of Regulation (EU) No 575/2013 (CRR) states that: "Monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50 % of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph." As this provision refers only to secured lending conducted with liquid assets (and not non-liquid assets), it would seem to suggest that repos conducted with a non-financial customer using non-liquid assets is subject to only a 50% inflow rate (e.g. now 100%). Could the EBA please confirm the correct interpretation?

European Banking Authority · Accepted Answer

Article 425(2)(a) of Regulation (EU) No. 575/2013 (CRR) does not apply to monies due from secured lending and capital market-driven transactions as defined Article in 192(3) that are collateralised by liquid assets in accordance with Article 416. Those operations are instead referred to in Article 425(2)(d) of the CRR, which specifies that monies due from secured lending and capital market-driven transactions, if they are collateralised by liquid assets as referred to in Article 416(1), shall not be taken into account up to the value of the liquid assets net of haircuts and shall be taken into account in full for the remaining monies due. Where these transactions are collateralised by transferable securities that do not qualify as assets referred to in Article 416(1) of the CRR, institutions shall take the corresponding inflow into account in full ; i.e. no rollover is assumed for these.

Repo conducted with a non-financial customer

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