Response to consultations on guidelines on payment commitments
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A payment within 2 working days is challenging. An extension of this deadline should be considered.
12 d) v). In order to safeguard the DGS´s creditor position, a Financial Collateral Arrangement should explicitly include the following contractual terms:
The obligation of the credit institutions to pay the Payment Commitment Amount is accelerated so as to be immediately due, at least when:
v) The credit institution is subject to reorganisation measures other than early intervention or crisis management measures, or is being wound up.
We would like to ask for clarification what is meant by the event of an enforcement, in particular the term reorganisation measures". We would understand only measures regarding Article 51 BRRD (Recovery and reorganisation measures to accompany bail-in). Other internal reorganisation measures should be excluded. These kinds of measures are part of common business activities and are the individual responsibility of any institution. In addition we would like to ask for specification that any other reorganization measure is subject to further negotiations between the DGS and the institutions before the payment commitment amount is paid."
Furthermore the application of haircuts becomes particularly disproportionate in cases where the low risk assets provided as collateral do not consist of debt securities as defined in Art. 336 CRR but of assets that are not affected by any market risks (e.g. deposits).
Do you think there are other requirements which should be provided under these GL about this issue?
No, we do not think there are other requirements which should be provided about this issue.
Question 2: Do you agree with these provisions to be included in Payment Commitment Arrangements? Do you think other provisions should be provided?
Multilateral or statutory arrangements should also be sufficient. This solution would still make sure that all provisions in the DGSD are met, in particular the requirement to ensure security and rapid availability of payment commitments. We request to include multilateral or statutory arrangements because we believe that different national company and tax laws require flexibility in order to allow for an optimal structuring.A payment within 2 working days is challenging. An extension of this deadline should be considered.
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 think that the payment within 2 working days is disproportionate. Payment commitments should be considered to be of the same nature as deposits or investments. Therefore a shorter period for the transformation into cash seems unreasonable. Part 3 - The Financial Collateral Arrangement:12 d) v). In order to safeguard the DGS´s creditor position, a Financial Collateral Arrangement should explicitly include the following contractual terms:
The obligation of the credit institutions to pay the Payment Commitment Amount is accelerated so as to be immediately due, at least when:
v) The credit institution is subject to reorganisation measures other than early intervention or crisis management measures, or is being wound up.
We would like to ask for clarification what is meant by the event of an enforcement, in particular the term reorganisation measures". We would understand only measures regarding Article 51 BRRD (Recovery and reorganisation measures to accompany bail-in). Other internal reorganisation measures should be excluded. These kinds of measures are part of common business activities and are the individual responsibility of any institution. In addition we would like to ask for specification that any other reorganization measure is subject to further negotiations between the DGS and the institutions before the payment commitment amount is paid."
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 prefer the Security Financial Collateral Arrangement. The ownership shall remain with the credit institution. Anyhow it should be under the responsibility of the DGS to provide for the options.Question 5: Do you think other requirements about the choice of the custodians should be provided under these guidelines?
No – seems absolutely appropriateQuestion 6: Do you agree on the requirements suggested for the eligibility of collateral? Would you suggest other limits on concentration in exposures?
Yes, however the chosen criteria should not be too burdensome.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?
We question the admissibility of haircuts on low risk assets in general. The DGSD is defining two aspects when it comes to investing the amount meant for deposit insurance, the potential investments within the DGS itself (see Art. 10/7 DGSD) and payment commitments (see Art. 10/3 DGSD in combination with Art. 2/13 and 14 DGSG). When comparing both definitions it ends up with the same potential investments possible. Especially when it comes to “low-risk assets”, the maximum risk that can be taken under both variations, they are linked to the definition at table 1 of Art. 336/1 CRR.Furthermore the application of haircuts becomes particularly disproportionate in cases where the low risk assets provided as collateral do not consist of debt securities as defined in Art. 336 CRR but of assets that are not affected by any market risks (e.g. deposits).
Do you think there are other requirements which should be provided under these GL about this issue?
No, we do not think there are other requirements which should be provided about this issue.