Response to consultations on guidelines on payment commitments

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Question 2: Do you agree with these provisions to be included in Payment Commitment Arrangements? Do you think other provisions should be provided?

The request of DGSs for cash payment should be in written form.

Question 3: Do you agree that a credit institution should pay in cash the Payment Commitment Amount, when its obligation becomes due, within 2 working days at the latest?

We are of the opinion that the credit institution should pay in cash the Payment Commitment Amount, when it becomes due, within 5 working days, rather than within 2 working days.

Question 4: Do you agree with the option left to the DGS to enter into a Security Financial Collateral Arrangement (full ownership remains with the credit institution) or a Title Transfer Financial Collateral Arrangement (full transfer of ownership)?

We agree with the option left to the DGS to enter into a Security Financial Collateral Arrangement (full ownership remains with the credit institution) or a Title Transfer Financial Collateral Arrangement (full transfer of ownership). The Title Transfer Financial Collateral Arrangement is more advantageous alternative for the DGSs, because such title transfer offers more direct access to the collateral for the DGS. We agree with EBA conclusion that, on the other hand it is very demanding for the credit institution which loses the property of the collateral and the rights of gathering its proceeds. Therefore we suggest that in case of Title Transfer Financial Collateral Arrangement the proceeds of the collateral may be paid out to the credit institution. This solution would allow the DGSs to benefit from the advantages of direct access to the collateral and on the other hand this alternative will be less demanding from the credit institutions perspectives.

Question 5: Do you think other requirements about the choice of the custodians should be provided under these guidelines?

No additional requirements about the choice of the custodians should be provided under the guidelines.

Question 6: Do you agree on the requirements suggested for the eligibility of collateral? Would you suggest other limits on concentration in exposures?

We do not suggest any additional limits.

Question 7: Do you consider appropriate not to consider the currency of issuance when determining whether debt instruments are correlated to an event of DGS pay-out, be it inside or outside the euro area?

We believe that it is appropriate not to consider the currency of issuance when determining whether a debt instrument’s value is correlated to an event of DGS pay-out, be it inside or outside the euro area.

Question 8: Do you consider that the proposed wording correctly applies the concept of proportionality, or whether some limits to concentration should be envisaged also for smaller, locally operating banks?

Limits should apply on the non-discriminatory basis, i.e. in the same way to all institutions.

Question 9: Do you agree with the criteria on the eligibility of the collateral provided in this Part 6? Do you think other requirements should be provided in these guidelines on this issue?

We do not suggest any additional requirements on the eligibility of collateral.

Question 10: Do you agree with the criteria on the haircut provided in this Part 7? Do you think there are other requirements which should be provided under these guidelines about this issue?

The haircuts should be similar or even the same as those applied by central banks in connection with repurchase transactions.

Question 11: Do you agree with the prudential approach suggested? Would you suggest further details on the methodology to be applied, and if so which ones?

No comment.

Name of organisation

Czech Banking Association