EBA · 2018_3741 Final Q&A

Reporting of Assets received as collateral in GC pooling transactions

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
416
Topic
Liquidity risk
Submitted by
Individual
Submitted
2018-02-27
Answered
2018-08-03
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

When a financial instrument is received as collateral in a GC pooling transactions which allows participants to refinance the collateral through transactions with Central Bank or with other transactions in the same market, is the above-mentioned financial instrument eligible for the liquidity buffer under Article 7 LCR DA conditions?

Background

The Delegated Act on LCR, under Article 7 requires that “ an asset shall be deemed to be unencumbered where the credit institution is not subject to any legal, contractual, regulatory or other restriction preventing it from liquidating, selling, transferring, assigning or, generally, disposing of such asset via active outright sale or repurchase agreement within the following 30 calendar days ”. GC pooling collateral management regulations impose limits to participants, leaving them the possibilities to refinance the collateral through transactions with Central Bank or with other transactions in the same market. In the frequently asked questions on Basel III monitoring updated at 27 March 2017 BCBS seems to admit the possibility to use this collateral as liquid asset. Should the collateral received in GC pooling market be eligible for the liquidity buffer under Delegated Regulation (EU) 2015/61?

Answer

According to Article 7(2) of Delegated Regulation (EU) No 2015/61, assets received as collateral that the credit institution may dispose of can be considered as unencumbered. This also applies to general collateral (GC) pooling transactions. Provided these assets received meet all other general and operational requirements set out in Articles 7 and 8 and are eligible as liquid assets in application of the provisions set out in Chapter 2 of Title II of Delegated Regulation (EU) No 2015/61, they can be included in the credit institution's liquidity buffer. Where applicable, assets received via GC pooling transactions should be subject to the unwind mechanism, as specified under Article 17 of Delegated Regulation (EU) No 2015/61.

Original source: European Banking Authority, Q&A ID 2018_3741

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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