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
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.
The Advisory Scientific Committee of ESRB published a response, in the form of an Insights Paper, to the EBA proposals for reforms to the stress testing framework in EU.
MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS.
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.
PRA published the policy statement PS19/20 on the final policy for extending coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balance.
EBA published the final draft implementing technical standards for disclosures and reporting on the minimum requirements for own funds and eligible liabilities (MREL) and the total loss-absorbing capacity (TLAC) requirements in EU.
EBA published an erratum for the phase 2 of technical package on the reporting framework 2.10.
EC published the Implementing Regulation 2020/1145, which lays down technical information for calculation of technical provisions and basic own funds.