Commission Delegated Regulation (EU) 2017/390Show full title

Article 10 U.K. Collateral for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) of Regulation (EU) No 909/2014

1. In order for collateral to be considered of the best quality for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) of Regulation (EU) No 909/2014, it shall consist of debt instruments that meet all of the following conditions:

(a) they are issued or explicitly guaranteed by one of the following:

(i)

a government;

(ii)

a central bank;

(iii)

one of the multilateral development banks listed in Article 117 of Regulation (EU) No 575/2013;

(iv)

the European Financial Stability Facility or the European Stability Mechanism;

(b) the CSD can demonstrate that they have low credit and market risk based upon its own internal assessment employing a defined and objective methodology that does not exclusively rely on external opinions and that takes into consideration the country risk of the particular country where the issuer is established;

(c) they are denominated in a currency the risks of which the CSD-banking service provider is able to manage;

(d) they are freely transferable without any legal constraint or third party claims that impair their liquidation;

(e) they fulfil one of the following requirements:

(i)

they have an active outright sale or repurchase agreement market, with a diverse group of buyers and sellers, including in stressed conditions and to which the CSD-banking service provider has reliable access;

(ii)

they can be liquidated by the CSD-banking service provider through a prearranged and highly reliable funding arrangement as referred to in point (e) of Article 59(4) of Regulation (EU) No 909/2014 and specified in Article 38 of this Regulation;

(f) reliable price data on such debt instruments are published on at least a daily basis;

(g) they are readily available and convertible into cash on a same-day basis.

2. In order for collateral, to be considered of a lower quality than that referred to in paragraph 1 for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) of Regulation (EU) No 909/2014, it shall consist of transferable securities and money market instruments that meet all of the following conditions:

(a) the financial instruments have been issued by an issuer that has low credit risk based on an adequate internal assessment by the CSD-banking service provider, employing a defined and objective methodology that does not exclusively rely on external opinions and that takes into consideration the risk arising from the establishment of the issuer in a particular country;

(b) the financial instruments have a low market risk based on an adequate internal assessment by the CSD-banking service provider, employing a defined and objective methodology that does not exclusively rely on external opinions;

(c) they are denominated in a currency the risks of which the CSD-banking service provider is able to manage;

(d) they are freely transferable and without any legal constraint or third party claims that impair their liquidation;

(e) they fulfil one of the following requirements:

(i)

they have an active outright sale or repurchase agreement market, with a diverse group of buyers and sellers, to which the CSD-banking service provider can demonstrate reliable access, including in stressed conditions;

(ii)

they can be liquidated by the CSD-banking service provider through a prearranged and highly reliable funding arrangement as referred to in point (e) of Article 59(4) of Regulation (EU) No 909/2014 and specified in Article 38 of this Regulation;

(f) they can be liquidated on a same-day basis;

(g) price data on these instruments are publicly available on a close to real-time basis;

(h) they are not issued by any of the following:

(i)

the participant providing the collateral, or by an entity that is part of the same group as the participant, except in the case of a covered bond and only where the assets backing that bond are appropriately segregated within a robust legal framework and satisfy the requirements set out in this Article;

(ii)

a CSD-banking service provider or an entity that is part of the same group as the CSD-banking service provider;

(iii)

an entity whose business involves providing services critical to the functioning of the CSD-banking service provider, unless that entity is a Union central bank or a central bank that issues a currency in which the CSD-banking service provider has exposures;

(i) they are not otherwise subject to significant wrong-way risk in the meaning of Article 291 of Regulation (EU) No 575/2013.