EBA · 2024_7074 Rejected question

Classification of Repo Transaction

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
104, para. 1
Topic
Market risk
Submitted by
Consultancy firm
Submitted
2024-04-30
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Question

How can internal repo transactions be managed in the calculation of the regulatory capital requirement in the A-IMA trading desk? Can these transactions be carved out from the scope of regulatory capital requirement of the A-IMA trading desk? Does the regulation prescribe that the funding in repos should be allocated to the trading/banking book accordingly to the funding strategy purpose? (if the funding is for banking book positions, the repos are non-trading instruments, if the funding is for trading book strategy the repos are trading book instruments). Is it possible to have different prudential classification of internal repos and external repo transactions on the market?

Background

An institution has a treasury department that provides funding to banking and trading book positions, netting short and long positions or managing maturity mismatching on the market without distinguishing prudential classification of underlying assets for economic reasons. This desk transfers the liquidity bought on the market to the A-IMA trading desks using internal repos, which are excluded from the prudential trading book as funding instruments, according to Art. 104 par.1 (h) of CRR 2 and as detailed in Basel Committee framework (MAR 25.9).
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7074

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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