Circular Letter No. CC/2021/00000026: Application of Alternative Treatment for Risk Positions in Tri-Party Repos for Large Exposures

Circular Letter No. CC/2021/00000026 Sent to: Credit Institutions and Financial Companies. Mod. 99999924/T – 01/14 Subject: Guidelines specifying the conditions for applying the alternative treatment of risk positions of institutions within the framework of "tri-party repos" provided for in paragraph 3 of Article 403 of Regulation (EU) No 575/2013 (CRR), for the purposes of large exposures (EBA/GL/2021/01)

The European Banking Authority (EBA) published, on February 16, 2021, the "Guidelines specifying the conditions for applying the alternative treatment of risk positions of institutions within the framework of 'tri-party repos' provided for in paragraph 3 of Article 403 of Regulation (EU) No 575/2013 (CRR), for the purposes of large exposures" (EBA/GL/2021/01; "Guidelines"), which apply from June 28, 2021.

The Guidelines: (i) specify, in accordance with the mandate established in paragraph 4 of Article 403 of the CRR, the conditions that an institution must fulfill when it decides to use the alternative treatment provided for in paragraph 3 of Article 403 of the CRR, with respect to "tri-party repos" mediated by a "tri-party agent", including the conditions and frequency for the determination, control, and review of the limits referred to in point (b) of paragraph 3 of Article 403 of the CRR, for the purposes of applying the substitution method provided for in point (b) of paragraph 1 of Article 403 of the CRR; (ii) apply to the risk positions of institutions towards issuers of collateral due to tri-party repos mediated by an agent providing asset management services for collateral.

Banco Portugal highlights the importance of less significant credit institutions and other entities subject to the provisions of that Regulation (hereinafter referred to as "institutions") giving adequate compliance with the Guidelines, which must be followed and applied in the context of the legislation and regulation currently in force applicable to them. These Guidelines will be taken into consideration by Banco Portugal in the interpretation of the legal and regulatory provisions applicable to institutions, for the purposes of verifying compliance therewith.

EBA Guidelines EBA/GL/2021/01: https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Guidelines/2021/Translations/964539/EBA%20Guidelines%20on%20tri-party%20repos%20for%20large%20exposures%20purposes_PT.pdf