Do custody accounts kept by a Central Securities Depository (CSD) in order to provide custody services fall under Article 390(6)(c) CRR even if the CSD has no licence to provide payment services under Annex C point (c) of CSDR , but it has license to provide services under point (a)?    

Article 390 (6)(c) CRR states that exposures shall not include “in the case of the provision of money transmission including the execution of payment services, clearing and settlement in any currency and correspondent banking or financial instruments clearing, settlement and custody services to clients, delayed receipts in funding and other exposures arising from client activity which do not last longer than the following business day”.

It is unclear whether custody accounts kept by a CSD in order to provide custody services fall under Article 390(6)(c) even if the CSD has no license to provide payment services under the CSDR Annex C point (c) (payment services involving processing of cash and foreign exchange transactions, within the meaning of point 4 of Annex I to Directive 2013/36/EU), but it has license to provide services under the CSDR Annex C. a) (providing cash accounts to, and accepting deposits from, participants in a securities settlement system and holders of securities accounts, within the meaning of point 1 of Annex I to Directive 2013/36/EU).

Example: An entity works as the Central Securities Depository, is authorised under Regulation (EU) No 909/2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (CSDR) and has obtained authorisation to provide banking-type ancillary services, namely to provide services listed in CSDR Annex C points (a), (b) and (e).  

Said entity operates as a CSD with a banking license. Clients keep their cash and securities accounts in the entity and settlement takes place in these accounts.

The amount of end-of-day cash balance on these accounts depends on the clients’ trading activities and the corporate actions. The entity keeps clients’ liabilities on nostro accounts, which is part of the entity’s large exposure against nostro account keepers.

Because of the above, the entity’s large exposures are mainly affected by clients’ activities and it is crucial to find an appropriate exemption rule to avoid large exposures limit breaches driven by the clients’ activities.

This question has been rejected because it is considered that EBA guidance or clarification on Article 390(6) CRR is not needed with regard to the issue that it raises. For example, this can be the case where it is considered that the existing regulatory framework is sufficiently clear and unambiguous, or where different practices may be possible but it is not currently necessary to harmonise these further through the Q&A process.

The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.

For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions”.