Collateral concentration limits
Clearstream Banking1 informs customers that from
2 January 2020
a new collateral concentration limits2 methodology will apply for customers.
Impact on customers
Concentration levels will be calculated based on end-of-day collateral positions of customers with secured credit facilities.
New concentration limits will be applied on the following criteria: Issuer, Country of issuer, Wrong Way Risk (issuer type and same country), Instrument type, Settlement currency, Credit rating, ECB eligibility, Liquidity and Price volatility.
Concentration Criteria | Concentration Limits (Set in accordance with article 14 of Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 (supplementing Regulation (EU) No 909/2014) |
Issuer | Maximum 25% of securities issued by entities belonging to same group. No concentration limit applies on securities issued or guaranteed by Governments, Central Banks, German States or Supranational rated BBB (Standard & Poor’s /Fitch) and above or Baa2 (Moody’s) and above. |
Country | Maximum 25% on any single country rated BBB- (Standard & Poor’s /Fitch) or Baa3 (Moody’s). No concentration limit applies on securities where the country of issuer is rated rated BBB (Standard & Poor’s /Fitch) and above or Baa2 (Moody’s) and above. |
WWR - Issuer type | Maximum 10% on securities issued by Financial institutions rated BBB- (Standard & Poor’s /Fitch) or Baa3 (Moody’s). No concentration limit on securities issued by financial institutions rated BBB (Standard & Poor’s /Fitch) and above or Baa2 (Moody’s) and above. |
WWR - Same country | Maximum 10% on securities issued by an entity of the same country as that of the customer if country is rated BBB- (Standard & Poor’s /Fitch) or Baa3 (Moody’s). No concentration limit applies if the country is rated BBB (Standard & Poor’s /Fitch) and above or Baa2 (Moody’s) and above. |
Instrument type | Maximum 50% on equities, certificates of deposit, commercial paper and convertible bonds (No concentration limit on straight bonds). |
Settlement currency | No concentration limit applies on securities issued in AUD, CAD, CHF, DKK, EUR, GBP, JPY, NOK, NZD, SEK and USD. Maximum 30% on securities issued in other currencies. |
Credit rating | Maximum 50% on securities rated BBB- (Standard & Poor’s /Fitch) or Baa3 (Moody’s) No concentration limit on instruments rated BBB (Standard & Poor’s /Fitch) and above or Baa2 (Moody’s) and above. |
ECB eligibility | Maximum 50% on securities not eligible at the ECB. |
Liquidity | Maximum 25% on securities with low liquidity score. |
Price volatility | Maximum 25% on securities with high volatility score. |
Clearstream Banking will monitor cases where a customer breaches any of the above-listed concentration limits. Clearstream Banking will analyse breaches of the concentration limits and inform customers accordingly.
Customers will be granted time to accommodate to the new collateral concentration limits criteria.
The collateral concentration limits will be covered by the upcoming new credit terms and conditions (CTCs)3 that are intended to cover the provision of both credit financing services; the i-TOF and the UCF.
Further information
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
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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.
2. Article 14 of Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 (supplementing Regulation (EU) No 909/2014).
3. The rollout is envisaged from Q1 2020 (specific communications will follow during 2020). Mandatory acceptance of the new CTCs is to be provided by November 2020 for all credit takers at the very latest to continue to benefit from credit services.