CSD Regulation (CSDR): Securities Collateral Tier Value and Highly Liquid Collateral (HLC)
Note: This announcement, originally published on 9 April 2020, was updated to correct the effective date.
According to the conditions specified in Article 9; Article 10 (1) and Article 10 (2) Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 (supplementing Regulation (EU) No 909/2014), Clearstream Banking1 will adapt its collateral eligibility and valuation approach from
18 May 2020
Collateral tier
In order to meet enhanced requirements aimed at further reducing risk exposures for CSDs, Clearstream Banking has taken measures requiring adjustments to collateral eligibility and Classification.
As required by Article 9 (1), point (b), sub-point (i) to sub-point (iii) of the above mentioned regulation, a collateral hierarchy will be introduced (four separate collateral tiers), which categorises collateral securities based on their quality and liquidity, by having HLC assets for T1a, T1b and T2; and non-HLC assets classified as T3.
Note: Clearstream Banking uses the term HLC (Highly Liquid Collateral) in place of the term QLR (Qualifying Liquid Resource) used in the Regulation.
Qualifying Liquid Resources2 are constituted of Highly Liquid Collateral with minimal credit and market risk.
Classification and eligibility table:
Tier | Collateral | HLC | Description |
T1A | Y | Y | Highly liquid collateral (Sovereigns, Central Banks, Multilateral Development Banks and European Mechanisms issuances) |
T1B | Y | Y | Highly liquid collateral (liquid instruments of good quality issued by reliable issuer with low credit risk) |
T2 | Y | Y | Highly liquid collateral (transferable instruments that are ECB eligible) |
T3 | Y | N | High quality collateral (other transferable instruments) |
T4 | N | N | Not available for collateral |
Reporting
The “Tier” value will be available in Xact Web Portal under Reference Data, Financial Instruments, Financial Instruments Query:
The query results will be displayed on a per ISIN basis:
Additionally, the MT535 Statement of Holdings in XML and PDF formats only will be enhanced with the associated total collateral value and total HLC value.
Tiering information should be considered when managing collateral portfolio.
From December 2020, credit takers will be required to hold a proportion of HLC within their portfolio.
Further information
The above change might require customers to adapt their monitoring and management of collateral positions. Customers are recommended to contact their Relationship Manager for a detailed impact assessment.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500. (CBL).
2. For more details, please refer to Article 34 of the Level 2 text - Regulation (EU) 2017/390 on regulatory technical standards (RTS) on prudential requirements as published in the Official Journal on 10 March 2017, available at the following link.