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Question

We have a question on template S.06.02 on repurchase agreements (repos). In the preparatory report one company has reported repos as negative assets with a negative SII value (C0170) with the CIC C0290 = XT 24 “Money market instruments”.
The repos are here a loan and the asset is still kept by the company and listed as an asset. We believe the reporting is wrong and that repos should only be reported with a positive number with CIC = XT 24 when you are a purchaser/buyer of securities for short term financing. If you use repos as short term financing our interpretation is that the negative number should not be reported at all in S.06.02 list of assets. We would like this to be confirmed and clarified.

European Insurance and Occupational Pensions Authority · Accepted Answer

The seller of the repo (i.e. the party that gives the underlying asset) recognises a liability in the balance sheet which should not have CIC as it is a liability. The seller usually keeps the underlying asset in his balance sheet because there’s no effective transfer of all risks and benefits related to the asset. Therefore, the seller should assign a CIC code to the underlying asset according to its nature as to any other asset, but identify in C0100 the option “4” (Asset pledged as collateral - 4 - Repos).
On the other side, the buyer of the repo (i.e. the party that receives the underlying asset) has an asset in the balance sheet (a credit for the money “lended” to the seller). The buyer does not recognize the underlying asset in his balance sheet because there’s no effective transfer of all risks and benefits related to the asset, which as we said remains in seller’s balance sheet.
Therefore, the underlying asset could be seen as a collateral and the credit recognized by the buyer should be considered as CIC 82 (Loans made collateralised with securities) or CIC 85 (Other collateralised loans made) for the cash-collaterised one, depending on the type of repo.

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