Single Rulebook Q&A

Question ID: 2017_3163
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Liquidity risk
Article: 423
Paragraph: 6
Subparagraph:
Article/Paragraph : 21
COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Type of submitter: Other
Subject matter : Deposits received and deposits posted as margin collateral for derivative exposures
Question:
Under Article 21 of Commission Delegated Regulation (EU) 2015/61:
 
1. Is the treatment of cash collateral received and cash collateral posted symmetrical in C73.00 and C74.00 in line with the answer given in Single Rulebook Q&A 2014_1089, which specifically referred to LCR C52.00 and C53.00?
 
2. Does the phrase “…collateral to be received” mean collateral already received at the reporting date?
Background on the question:

In Article 21 of Commission Delegated Regulation (EU) 2015/61 the reference is only to collateral to be received and not to collateral posted.

Similarly, in Annex XXV Reporting on Liquidity (Part 2 Outflows) the reporting instructions for C73.00 Row 340 make no mention of deposits posted as collateral whereas, in ANNEX XXV Reporting on Liquidity (Part 3: Inflow), the reporting instructions for C74.00 Row 240 specifically refer to netting of collateral to be received.
 
The wording “to be received” implies the inclusion of future cash flows after the reporting date which may, for example, represent a margin call issued but not yet settled. Q&A 2014_1089 only refers to deposits received and deposits posted.
Date of submission: 15/02/2017
Published as Final Q&A: 03/11/2017
EBA answer:

According to Articles 21, 30(4) and 32(5) of Delegated Regulation (EU) 2015/61, liquidity outflows and inflows expected over a 30 calendar day period for the contracts listed in Annex II of Regulation (EU) 575/2013 shall be calculated on a net basis by the counterparty subject to the existence of bilateral netting agreements. Net basis shall be considered to be net of collateral to be received/ posted provided that it qualifies as a liquid asset.

With regard to Article 32(5) of Delegated Regulation (EU) 2015/61, where contracts listed in Annex II of Regulation 575/2013 (CRR) are collateralised by liquid assets under Title II that have to be returned to the counterparty within 30 days, cash inflows arising from these contracts should be calculated net of any corresponding collateral (captured in row 240 of C 74.00).
 
Pursuant to Article 30(4) of Delegated Regulation (EU) 2015/61, where contracts listed in Annex II of Regulation 575/2013 (CRR) are collateralised by liquid assets under Title II that have to be returned to the institution within 30 days, cash outflows arising from these contracts should be calculated net of any corresponding collateral (captured in row 340 of C 73.00).
 
This is consistent with the principle that banks should not double-count liquidity inflows or outflows.
 
As regards the first part of the question, the treatment of cash collateral is specified in EBA answer to Q&A 2014_1089.
 
In relation to the second part of the question, according to Article 21 of Regulation (EU) 2015/61 the treatment of cash collateral shall apply to collateral that has already been received or posted by the institution up to close of business of the reporting date.
Status: Final Q&A
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