- Question ID
-
2025_7575
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Market risk
- Article
-
271
- Paragraph
-
1
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
-
.
- Name of institution / submitter
-
European Central Bank
- Country of incorporation / residence
-
Germany
- Type of submitter
-
Competent authority
- Subject matter
-
SPV repack transactions
- Question
-
Do SPV repackaging transaction on standardised platforms incur counterparty credit risk (CCR) or is the termination scenario considered a contractual feature that only results in market risk? If these transactions are subject to counterparty credit risk, how should the value of the collateral be taken into account?
- Background on the question
-
Investment banks use SPVs set up via industry-wide platforms to transform bond cash flows into other cash flow schedules. The sole purpose of these SPVs is the issuance of notes, which are backed by bonds held by the SPV. Investment banks then enter into swap transactions with these SPVs to transform the bond cash flow schedule into a cash flow schedule meeting the needs of third-party investors, which buy the notes from the SPVs.
These derivative transactions between the investment banks and the SPVs are governed by master netting agreements which include credit support annexes (CSAs). Under these CSAs, SPVs may post the bonds they hold as collateral to the investment banks. Given these SPVs are only generated for issuing notes, which are backed by the underlying bonds, the default of the SPV can only occur if the bond cash flows are no longer paid. - Submission date
- Status
-
Question under review