EBA is consulting on the draft guidelines that specify conditions for the application of alternative treatment of institutions’ exposures related to “tri-party repurchase agreements,” as set out in Article 403(3) of the Capital Requirements Regulation or CRR (575/2013), for large exposures purposes. The consultation runs until October 22, 2020 and the guidelines will apply from June 2021.
Under the alternative treatment, an institution can replace the total amount of its exposure to a collateral issuer due to tri-party repurchase agreements facilitated by a tri-party agent, with the full amount of the limits that the institution would instruct the tri-party agent to apply to securities issued by the collateral issuer. To be able to conduct the aforementioned replacement, institutions must observe certain conditions. The guidelines specify those conditions, including the frequency for determining, monitoring, and revising the full amount of the limits instructed by the institution to the tri-party agent. Moreover, the guidelines:
- Recommend a set of elements that an institution and a tri-party agent should include in their service agreement for the use of the alternative treatment
- Establish a set of safeguards that the tri-party agent has to put in place and for which the institution needs to verify the appropriateness for the use of the alternative treatment
- Specify how institutions should determine the limits to be applied by a tri-party agent with regard to the securities of a collateral issuer as well as the general framework under which such limits can be revised
- Provide a non-exhaustive list of circumstances that could lead the competent authority to raise material concerns and that would prevent the use of the alternative treatment by institutions
- Specify a procedure for dealing with the above-mentioned material concerns
The guidelines will be translated into the official EU languages and published on the EBA website. The deadline for competent authorities to report whether they comply with the guidelines will be two months after the publication of the translations.
Comment Due Date: October 22, 2020
Keywords: Europe, EU, Banking, CRR, Large Exposures, Basel, Repurchase Agreement, Repo, EBA
Previous ArticlePRA Proposes Simplified Obligations for Recovery Planning
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.