In accordance with Article 10(1)(g) of Delegated Regulation (EU) 2017/390 (RTS on prudential requirements of CSDs), in order for collateral to be considered of the best quality, for the purposes of point (d) of Article 59(3) and Article 59(4) of Regulation (EU) No 909/2014 (CSDR), it shall consist of debt instruments that are readily available and convertible into cash on a same-day basis.

In accordance with Article 10(2)(f) of the RTS on prudential requirements of CSDs, in order for collateral, to be considered of a lower quality for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) CSDR, it shall consist of transferable securities and money market instruments that can be liquidated on a same-day basis.

In accordance with Article 11(1)(d) of the RTS on prudential requirements of CSDs, other types of collateral to be used by a CSD-banking service provider shall consist of financial instruments for which the CSD-banking service provider has a prearranged funding arrangement with the type of creditworthy financial institution referred to in point (e) of Article 59(4) CSDR and specified in Article 38 of the RTS on prudential requirements of CSDs, which provides for the conversion of these instruments into cash on a same-day basis.

In accordance to Article 38(14) of the RTS on prudential requirements of CSDs, arrangements in order to convert collateral or investment into cash using prearranged and highly reliable funding arrangements, the CSD-banking service provider shall be capable of accessing and converting non-cash assets referred to in Article 10 and Article 11(1) into cash on a same-day basis through pre-arranged and highly reliable arrangements established in accordance with point (d) of Article 59(4) CSDR.

Therefore, despite some difference in the wording applied (“readily available and convertible into cash”, “liquidated” “provides for the conversion”, “capable of accessing and converting”) the different provisions refer to the quality of the assets, or the structure of the service, to convert the assets to be used as collateral into cash, within the same business day. 

Recital (30) of the RTS on prudential requirements of CSDs, should also be considered, as it points out to two aspects: firstly, that the highly reliable funding arrangements are in place to ensure that collateral can be converted into cash even in “extreme but plausible market conditions”. That implies that waiting until the following day for the conversion into cash is not envisaged by that regulation. Second, the same regulation further requires the CSD-banking service provider to mitigate intraday risks.

Therefore, the same provisions apply also to CSD-banking service providers that operate in multiple time-zones. Such CSD-banking service providers should take into consideration of the opening hours of the local payment systems of each individual currency they operate when setting the highly reliable funding arrangements. The CSD-banking service providers should not assume that the cut-off hours are interpreted as an exception that allows the conversion into cash on the following day.