EBA · 2019_4499 Rejected question

Treatment of exposure for unsettled repurchase and reverse repurchase agreements

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
429
Topic
Leverage ratio
Submitted by
Individual
Submitted
2019-01-31
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Question

For leverage ratio calculation purposes, it is asked to clarify the exposures to be recognized for both repurchase and reverse repurchase agreements, with specific reference to unsettled transactions.

Background

According to art. 429 of CRR (as modified from Commission Delegated Regulation 2015/62), exposures to be considered for the Leverage ratio purposes shall follow the rules set in par. 4; specifically, for repurchase and reverse repurchase transactions, the following components shall be considered: - the accounting value as set in art. 111.1, first sentence; - the add-on for counterparty risk as set in art. 429.4(c). As of the quarter-end: - in case of unsettled reverse repurchase agreements, commitments to deliver are recognized for accounting purposes (e.g. where trade date is set on 29th day of the reporting month, and settlement date is set on 2nd day of the following month); considering that the cash for settling is still in the bank’s availability (among “Other assets” for Leverage Ratio purposes), the recognition of commitments will lead to duplicate exposures: - in case of unsettled repurchase agreements, the add-on is already embedded in the value of asset to be delivered in the transaction.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2019_4499

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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