2013_474 Treatment of collateral posted from client to clearing Member in Large Exposures

Question ID:

2013_474

Legal Act:

Regulation (EU) No 575/2013 (CRR)

Topic:

Large exposures

Article:

4, 305, 306, 390

Paragraph:

1, 2, 2

Subparagraph:

COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:

Not applicable

Article/Paragraph:

not applicable

Disclose name of institution / entity:

Yes

Name of institution / submitter:

Austrian Federal Economic Chamber, Division Bank and Insurance

Country of incorporation / residence:

Austria

Type of submitter:

Industry association

Subject Matter:

Treatment of collateral posted from client to clearing Member in Large Exposures

Question:

Does Article 390(1) of Regulation (EU) No 575/2013 (CRR) include collateral posted from client to clearing member?

Background on the question:

If so, posted collateral could receive an exposure value of 0 (Article 306 (2) CRR) for the purposes of large exposures, provided that all of the pre-conditions of Articles 305(2) and 306(2) are fulfilled. Please note, that otherwise there is a risk of exceeding the LE-Limit of Article 395 (1) CRR, since collateral claims of a CCP have to meet, regardless of any limits and CCP related trade exposures of a client are not an exemption according to Article 400 of CRR.

Date of submission:

01/11/2013

Published as Final Q&A:

28/03/2014

Final Answer:

Trade exposures, as defined in Article 4(1)(91) of Regulation (EU) No. 575/2013 (CRR), include the current and potential future exposures of clients and clearing members to CCPs arising from contracts listed in Annex II of CRR, credit derivatives and transactions listed in points (b) to (e) of Article 301(1) of the CRR. Trade exposures also include the collateral posted by clients and clearing members to CCPs.

For large exposure purposes, trade exposures, including those arising from posted collateral, are exempted from the application of Article 395(1) of the CRR in accordance with Article 400(1)(j).

For solvency purposes - when clients calculate the own funds requirements for trade exposures, and provided the conditions set out in Article 305(2) of the CRR are met, the exposure value of assets posted as collateral may be reduced to zero in accordance with Article 306(2), provided that these assets are bankruptcy remote in the event of the CCP, clearing member or any other clients of the clearing members defaulting.

Status:

Final Q&A

Answer prepared by:

Answer prepared by the EBA.

Note to Q&A:

Update 16.09.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.