EBA · 2018_3659 Rejected question

Highly reliable prearranged funding arrangements

Regulation
Regulation (EU) No 909/2014 (CSDR) - only RTS 2017/390
Article
Article 59 (4) EBA-RTS and Article 38 (6) (b) EBA RTS
Topic
Market infrastructures
Submitted by
Other
Submitted
2018-01-04
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Question

Problem Article 59 (4) EBA-RTS and Article 38 (6) (b) EBA RTS do not specify if these arrangements require committed agreements in place, or if uncommitted facilities such as Global Master Repurchase Agreements (GMRAs) or access to CCP repo trading are sufficient. According to our knowledge there is also no definition of “prearranged arrangements” in the relevant European Banking legislation (particularly not in the CRD IV/CRR). Furthermore there is ample evidence that repo arrangements against high quality securities have proven highly reliable and liquid throughout the financial crisis. In addition, repo transactions through a centralised order book and CCP cleared (such as for example the Eurex Repo GC Pooling services), have also proven to be a preferred market option in particular in times of market stress.

Background

Background Article 59 (4) EBA-RTS states that a banking service provider shall mitigate the corresponding liquidity risk with (…) and highly liquid collateral or investments that are readily available and convertible into cash with prearranged and highly reliable funding arrangements. Article 38 (6) (b) EBA RTS requires a CSD-banking service provider to have at least two arrangements in place to convert collateral or investment into cash for each major currency where it does not have access to routine credit at the central bank.
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Original source: European Banking Authority, Q&A ID 2018_3659

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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