Instruction No. 14/2023

Instruction No. 14/2023
BO No. 6/2023 Supplement • 2023/06/21
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Topics
Markets :: Money Markets
Mod. 99999940/T – 01/14
Index
Text of the Instruction
Text of the Instruction
Subject: Amending Instruction No. 3/2015
On 16 December 2022, the Governing Council of the ECB approved the Guideline (EU) 2023/831 of the European Central Bank, amending Guideline (EU) 2015/510 of the European Central Bank (ECB/2014/60) on the framework for the implementation of the Eurosystem monetary policy (ECB/2022/48), as well as Guideline (EU) 2023/832 of the European Central Bank, amending Guideline ECB/2015/35 on the haircuts to be applied in the implementation of the Eurosystem monetary policy (ECB/2022/49).

Changes have been introduced to the risk control framework, including the elimination of the temporary reduction in haircuts introduced under COVID-19, the inclusion of legislative and multi-currency asset-backed securities in the Haircut Category II, the reassignment of debt instruments issued by the European Union from Haircut Category II to Category I, the division of the longer-term instruments category into three new categories, the specification and adjustment of the definition of residual maturity for own-use asset-backed securities, the replacement of the current 5% theoretical mark-to-market reduction applicable to traded assets with a sliding scale reduction based on maturity, and the alignment of the classification of haircuts for traded assets with fixed and floating coupons.

Accordingly, under the powers conferred by Articles 12, 15, 16, and 24 of its Organic Law, approved by Law No. 5/98 of 31 January, in its current version, the Bank of Portugal determines:

Instruction No. 3/2015 (BO No. 5, of 15-05-2015) is amended as follows:

1. In Article 2, point 48) is repealed.

2. In Annex X, Haircuts,

a) Article 2, points a), b), and c), are amended to read as follows:

a) Haircut Category I includes debt instruments issued by central governments, debt certificates issued by the European Union, debt certificates issued by the ECB, and debt certificates issued by NCBs before the date of adoption of the euro in their respective Member States whose currency is the euro;

b) Haircut Category II includes debt instruments issued by:

i) local and regional authorities; ii) entities that are credit institutions or non-credit institutions classified by the Eurosystem as agencies and that meet the quantitative criteria set out in Annex XII-A of Guideline (EU) 2015/510 (ECB/2014/60); iii) multilateral development banks and international organisations other than the European Union; as well as legislative and multi-currency asset-backed securities;

c) Haircut Category III includes debt instruments issued by:

i) non-financial corporations, ii) public administration sector enterprises, and iii) agencies that are not credit institutions and do not meet the quantitative criteria set out in Annex XII-A of Guideline (EU) 2015/510 (ECB/2014/60);

3. Article 3 is amended to read as follows:

Article 3
Haircuts applicable to traded assets

1. The determination of haircuts applicable to traded assets classified in Categories I to IV is based on:

a) the classification of the specific asset, regarding the credit quality level 1, 2, or 3; b) the residual maturity of the asset, as specified in paragraph 2; c) the coupon structure of the asset, as specified in paragraph 2.

2. Regarding traded assets included in Categories I to IV, the haircut depends on the residual maturity and the coupon structure of the asset (fixed/floating or zero), as determined in Table 2 of the Annex to this Guideline. The relevant maturity for determining the applicable haircut is the residual maturity of the asset, regardless of its coupon structure.

2-A. The determination of the residual maturity for own-use asset-backed securities depends on whether they have a single maturity structure with a soft bullet or an amortization structure conditioned by pass-through, as follows:

(a) in the case of asset-backed securities with a single maturity structure with a soft bullet, the residual maturity must be defined as the maximum duration until which the maturity can be extended, as reflected in the terms and conditions of the specific asset-backed security; (b) in the case of covered bonds for own use with an amortization structure conditioned by pass-through, the residual maturity must correspond to the category [10,15) years.

For the purposes of paragraph 2-A, "own use" means the presentation or use by a counterparty of asset-backed securities issued or guaranteed by the counterparty itself or by any other entity with which it has a close relationship determined in accordance with Article 138 of Guideline (EU) 2015/510 (ECB/2014/60).

3. Regarding traded assets included in Haircut Category V, regardless of their coupon structure, the determination of applicable haircuts is based on the weighted average life of the asset, as specified in paragraphs 4 and 5. The haircuts applicable to traded assets in Category V are set out in Table 2-A of the Annex to this Guideline.

4. The weighted average life of the senior tranche of a securitised debt instrument is estimated as the expected weighted average time remaining until the repayment of that tranche. Regarding retained securitised debt instruments, it must be assumed, for the purposes of calculating the weighted average life, that the issuer's call option will not be exercised.

5. For the purposes of paragraph 4, "retained securitised debt instruments mobilised" means securitised debt instruments used in a percentage greater than 75% of the nominal amount outstanding, by the counterparty that originated the securitised debt instrument or by entities with close relationships with the originator. The existence of close relationships is determined in accordance with Article 138 of Guideline (EU) 2015/510 (ECB/2014/60).

4. Article 4 is amended to read as follows:

Article 4
Additional haircuts applicable to specific types of traded assets

In addition to the haircuts provided for in Article 3 of this Guideline, the following additional haircuts apply to specific types of traded assets:

a) all traded assets allocated in Haircut Categories II, III, IV, and V, which are valued theoretically in accordance with the rules set out in Article 134 of Guideline (EU) 2015/510 (ECB/2014/60), are subject to an additional haircut in the form of an additional valuation markdown. The additional valuation reduction, also for own-use asset-backed securities, will depend on the expected residual maturity or, in the case of Haircut Category V, the weighted average life of the asset, at the levels set out in Table 4 of the Annex to this Guideline. For the purposes of calculating the additional valuation reduction for own-use asset-backed securities, the expected residual maturity is the initially scheduled maturity date, unless and until a maturity extension is triggered;

b) own-use asset-backed securities are subject to an additional haircut of: i) 8% on the value of debt instruments assigned a credit quality level 1 and 2; and ii) 12% on the value of debt instruments assigned a credit quality level 3. For the purposes of this point, the expression "own use" has the same meaning as attributed to it in Article 3, paragraph 2-A;

c) if the additional haircut referred to in point b) cannot be applied to the collateral asset management system of an NCB, a collateral asset management service provider (triparty agent), or TARGET for autocolateralisation, the additional haircut must be applied in such systems or platforms to the value of the entire issuance of asset-backed securities that can be subject to own use.

5. Article 5, paragraph 5, is amended to read as follows:

5. Non-traded debt instruments secured by mortgage loans to individuals are subject to a haircut of 31.5%.

6. Table 1 is amended, being replaced by the following:

Table 1: Haircut Categories applicable to eligible traded assets, based on the type of issuer and/or the type of asset

Category I	Category II	Category III	Category IV	Category V
Debt instruments issued by central governments	Debt instruments issued by the European Union	Debt certificates of the ECB	Debt certificates issued by NCs before the date of adoption of the euro in their respective Member States	Debt instruments issued by local and regional authorities
				Debt instruments issued by entities (credit institutions or non-credit institutions) classified by the Eurosystem as agencies and that meet the quantitative criteria set out in Annex XII-A of Guideline (EU) 2015/510 (ECB/2014/60)
				Debt instruments issued by multilateral development banks and international organisations other than the European Union
				Legislative Multi-currency Asset-backed securities
				Debt instruments issued by non-financial corporations, public administration sector enterprises, and agencies that are not credit institutions and do not meet the quantitative criteria set out in Annex XII-A of Guideline (EU) 2015/510 (ECB/2014/60)
				Unsecured debt instruments issued by credit institutions and by agencies that are credit institutions that do not meet the quantitative criteria set out in Annex XII-A of Guideline (EU) 2015/510 (ECB/2014/60)
				Unsecured debt instruments issued by financial corporations that are not credit institutions
				Securitised debt instruments

7. Table 2 is amended, being replaced by the following:

Table 2
Haircut levels (in %) applicable to eligible traded assets in Haircut Categories I to IV

Credit Quality	Residual Maturity (years)	Category I Fixed/Floating Coupon	Category I Zero Coupon	Category II Fixed/Floating Coupon	Category II Zero Coupon	Category III Fixed/Floating Coupon	Category III Zero Coupon	Category IV Fixed/Floating Coupon	Category IV Zero Coupon
Levels 1 and 2	[0,1)	0.5	0.5	1.0	7.5	7.5
	[1,3)	1.0	2.0	1.5	2.5	2.0	3.0	10.0	11.5
	[3,5)	1.5	2.5	2.5	3.5	3.0	4.5	12.0	13.0
	[5,7)	2.0	3.0	3.5	4.5	4.5	6.0	14.0	15.0
	[7,10)	3.0	4.0	4.5	6.5	6.0	8.0	16.0	17.5
	[10,15)	4.0	5.0	6.5	8.5	7.5	10.0	18.0	22.5
	[15,30)	5.0	6.0	8.0	11.5	9.0	13.0	21.0	25.0
	[30,∞)	6.0	9.0	10.0	13.0	11.0	16.0	24.0	31.5
Credit Quality	Residual Maturity (years)	Category I Fixed/Floating Coupon	Category I Zero Coupon	Category II Fixed/Floating Coupon	Category II Zero Coupon	Category III Fixed/Floating Coupon	Category III Zero Coupon	Category IV Fixed/Floating Coupon	Category IV Zero Coupon
Level 3	[0,1)	5.0	5.0	5.5	5.5	6.5	6.5	11.5	11.5
	[1,3)	6.0	7.0	7.5	10.5	9.5	12.0	18.5	20.0
	[3,5)	8.5	10.0	11.0	16.0	13.0	18.0	23.0	27.0
	[5,7)	10.0	11.5	12.5	17.0	15.0	21.5	25.5	29.5
	[7,10)	11.5	13.0	14.0	21.0	17.0	23.5	26.5	31.5
	[10,15)	12.5	14.0	17.0	25.5	19.5	28.0	28.5	35.0
	[15,30)	13.5	15.0	20.0	28.5	22.0	31.0	31.5	39.0
	[30,∞)	14.0	17.0	22.0	32.5	25.0	35.5	34.5	43.0

• i.e., [0,1) residual maturity less than one year, [1,3) residual maturity equal to or greater than one year and less than three years, etc.

8. Table 2-A is amended, being replaced by the following:

Table 2-A
Haircut levels (in %) applicable to eligible traded assets included in Haircut Category V

Category V	Credit Quality	Weighted Average Life (*)	Haircut
Levels 1 and 2	[0,1)	4.0
	[1,3)	5.0
	[3,5)	7.0
	[5,7)	9.0
	[7,10)	12.0
	[10,15)	18.0
	[15,30)	20.0
	[30,∞)	22.0

• i.e., [0,1) residual/weighted average life less than one year, [1,3) residual/weighted average life equal to or greater than one year and less than three years, etc.

9. Table 3 is amended, being replaced by the following:

Table 3
Haircut levels (in %) applicable to eligible receivables

Credit Quality	Residual Maturity (years)*	Fixed Rate Interest Payment	Floating Rate Interest Payment
Levels 1 and 2	[0,1)	8.0	8.0
	[1,3)	11.5	8.0
	[3,5)	15.0	8.0
	[5,7)	20.0	11.5
	[7,10)	26.0	15.0
	[10,15)	33.0	20.0
	[15,30)	38.0	26.0
	[30, ∞)	40.0	33.0
Level 3	[0,1)	16.0	16.0
	[1,3)	25.0	16.0
	[3,5)	35.0	16.0
	[5,7)	42.0	25.0
	[7,10)	46.0	35.0
	[10,15)	48.0	42.0
	[15,30)	50.0	46.0
	[30, ∞)	52.0	48.0

• i.e., [0,1) residual maturity less than one year, [1,3) residual maturity equal to or greater than one year and less than three years, etc;

10. The following Table 4 is added:

Table 4
Additional valuation reduction levels (in %) applied to traded assets in Haircut Categories II to V that are valued theoretically

Residual Maturity/Weighted Average Life (years) (*)	Additional Valuation Reduction (valuation markdown)
[0,1)	1.5
[1,3)	2.5
[3,5)	3.0
[5,7)	3.5
[7,10)	4.5
[10,15)	6.0
[15,30)	8.0
[30, ∞)	13.0

• i.e., [0,1) residual/weighted average life less than one year, [1,3) residual/weighted average life equal to or greater than one year and less than three years, etc.

11. In Annex XII, point VI, is amended to read as follows:

VI. EXAMPLE 6: RISK CONTROL MEASURES

1. This example illustrates the risk control system applied to assets pledged for Eurosystem credit operations. The example is based on the premise that, in the calculation of the need for additional margin (margin call), accrued interest on the lent liquidity is taken into account and a variation margin (trigger point) of 0.5% is applied to the lent liquidity. The example is based on the hypothesis that the counterparty participates in the following Eurosystem monetary policy operations:

a) a main refinancing operation starting on 21 September 2022 and ending on 28 September 2022, in which the counterparty receives 50,000,000 EUR at an interest rate of 1.25%; b) a longer-term main refinancing operation starting on 22 September 2022 and ending on 21 December 2022, in which the counterparty receives 45,000,000 EUR at an interest rate of 1.25%; c) a main refinancing operation starting on 28 September 2022 and ending on 5 October 2022, in which the counterparty receives 35,000,000 EUR at an interest rate of 1.25%.

2. The characteristics of the traded assets used by the counterparty to secure these operations are specified in Table 1 below.

Table 1
Traded assets used in operations

Characteristics	Designation	Asset Category	Maturity Date	Coupon Definition	Coupon Frequency	Residual Maturity	Credit Quality Level	Haircut
Asset A	Asset-backed security	21.12.2026	Fixed Rate 6 months	4 years	1-2	2.50%
Asset B	Central government bond	24.2.2027	Variable Rate 12 months	4 years	1-2	1.50%
Asset C	Corporate bond	24.1.2035	Zero Coupon 12 years	1-2	10.00%

Prices in percentages (including accrued interest) (*1)

	21.9.2022	22.9.2022	23.9.2022	26.9.2022	27.9.2022	28.9.2022	29.9.2022
Asset A	101.61	101.21	99.50	99.97	99.73	100.01	100.12
Asset B	98.62	97.95	98.15	98.56	98.59	98.57
Asset C	53.71	53.62

(*1) The prices presented for a specific valuation date correspond to the most representative price on the business day preceding this valuation date.

INDIVIDUAL COLLATERAL SYSTEM

First, it is considered that the transactions are carried out with a national central bank (NCB) that uses a system in which the underlying assets individually secure each operation. The valuation of pledged assets is carried out on a daily basis. The risk control system can be described as follows (see also Table 2 below):

1. On 21 September 2022, the counterparty enters into a secured loan transaction with the NCB, which receives 50,600,000 euros from Asset A. Asset A is an asset-backed security with a fixed rate coupon maturing on 21 December 2026, corresponding to a credit quality level 1-2. The zero-coupon bond has a residual maturity of four years and, therefore, the haircut is 2.5%. The market price of Asset A in the reference market on that day is 101.61%, including the accrued coupon interest. The counterparty is required to deliver an amount of Asset A that — after deducting the 2.5% haircut — exceeds the lent amount of 50,000,000 EUR. Therefore, the counterparty delivers Asset A in a nominal amount of 50,600,000 EUR, whose market value adjusted by the haircut on that day is 50,129,294 EUR.

Instruction No. 14/2023 BO No. 6/2023 Supplement • 2023/06/21 Topics Markets :: Money Markets
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Mod. 99999940/T – 01/14

2. On September 22, 2022, the counterparty enters into a repurchase agreement with the CB, which purchases EUR 21,000,000 of Asset A (market price 101.21%, haircuts 2.5%) and EUR 25,000,000 of Asset B (market price 98.62%). Asset B is a central government debt bond with variable coupon payments, corresponding to a credit quality level of 1-2, to which a haircut of 1.5% applies. The market value adjusted by the haircut of Asset A and Asset B on that day is EUR 45,007,923, thereby exceeding the amount of EUR 45,000,000 that is required.

3. On September 22, 2022, the underlying assets of the main refinancing operation that began on September 21, 2022 are revalued. With a market price of 101.21%, the market value adjusted by the haircut of Asset A remains within the lower and upper limits of the margin of variation. Consequently, the initially mobilized collateral asset is considered to cover both the initial amount of liquidity provided and the accrued interest in the amount of EUR 1,736.

4. On September 23, 2022, the underlying assets are revalued: the market price of Asset A is 99.50% and the market price of Asset B is 97.95%. The accrued interest relating to the main refinancing operation that began on September 21, 2022 amounts to EUR 3,472, and that relating to the longer-term refinancing operation initiated on September 22, 2022 amounts to EUR 1,563. Consequently, the market value adjusted by the haircut of Asset A in the first operation falls by EUR 915,147, to a value lower than the coverage value of the operation, i.e., the liquidity provided plus the accrued interest, but also below the lower limit of the margin of variation, of EUR 49,753,455.

The counterparty delivers EUR 950,000 of Asset A in terms of nominal value, which, after deduction of a haircut of 2.5% on the market value, based on a price of 99.50%, restores the sufficiency of collateral coverage. The CBs may make payments of additional coverage values in funds, instead of securities. An additional coverage value is also required in the second transaction, since the market value adjusted by the haircut of the collateral assets used in this transaction (EUR 44,492,813) is below the lower level of the margin of variation (EUR 44,776,555). Thus, the counterparty delivers EUR 550,000 of Asset B with a market value adjusted by the haircut of EUR 530,644.

5. On September 26, 2022, the underlying assets are revalued, not giving rise to the need for additional coverage value for the transactions contracted on September 21 and 22, 2022.

On September 27, 2022, the revaluation of underlying assets of the longer-term refinancing operation starting on September 22, 2022 shows that the market value adjusted by the haircut of the assets delivered exceeds the

Instruction No. 14/2023 BO No. 6/2023 Supplement • 2023/06/21 Topics Markets :: Money Markets
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Mod. 99999940/T – 01/14 upper level of the margin of variation and leads to the CB returning to the counterparty EUR 300,000 of Asset B, in nominal value. If the CB has to pay a margin to the counterparty regarding the second transaction, such margin may, in certain cases, be offset by the margin paid by the counterparty to the CB in the first transaction. As a result, only a margin payment would occur.

6. On September 28, 2022, the counterparty repays the liquidity provided in the main refinancing operation starting on September 21, 2022, including accrued interest of EUR 12,153. The CB returns EUR 51,550,000 of Asset A in nominal value.

On the same day, the counterparty enters into a new secured lending operation with eligible assets with the CB, which purchases EUR 72,500,000 of Asset C in terms of nominal value. Since Asset C is a zero-coupon corporate bond with a residual maturity of 12 years and to which a credit quality level of 1-2 has been assigned, requiring a haircut of 10%, its market value adjusted by the haircut on that day is EUR 35,045,775.

GLOBAL COLLATERAL SYSTEM

Secondly, it is considered that the operations are carried out with a CB that uses a global collateral system when the assets included in the global collateral used by the counterparty are not allocated to specific operations:

1. In this example, the same sequence of operations referred to in the previous example, relating to the individual collateral system, is used. The main difference lies in the fact that, on the revaluation dates, the market value adjusted by the haircut of all assets included in the global collateral must cover the total value of all ongoing operations of the counterparty with the CB. The additional coverage value of EUR 1,423,897 existing on September 23, 2022 is identical in this example to that required in the case of the individual collateral system. The counterparty delivers EUR 1,500,000 of Asset A in terms of nominal value, which, after the deduction of a haircut of 2.5% on the market value, based on a price of 99.50%, restores the sufficiency of collateral coverage.

2. Furthermore, on September 28, 2022, when the main refinancing operation contracted on September 21, 2022 matures, the counterparty may keep the assets in its pledge account. An asset can also be exchanged for another, as can be seen in the example, in which EUR 52,100,000 of Asset A, in nominal value, are replaced by EUR 72,500,000 of Asset C, in nominal value, in order to cover the liquidity provided and the accrued interest in all refinancing operations.

3. The risk control system in a global collateral system is described in Table 3.

Instruction No. 14/2023 BO No. 6/2023 Supplement • 2023/06/21 Topics Markets :: Money Markets
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Mod. 99999940/T – 01/14

Table 2
Individual collateral system

Date	Operations to be settled	Start Date	Repayment Date	Interest Rate	Liquidity Provided	Accrued Interest	Total Amount to Cover	Lower Limit of Margin of Variation	Upper Limit of Margin of Variation	Market Value Adjusted by Haircut	Additional Coverage Value
21.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	-	50 000 000	49 750 000	50 250 000	50 129 294
22.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	1 736	50 001 736	49 751 727	50 251 745	49 931 954
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	-	45 000 000	44 775 000	45 225 000	45 007 923
23.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	3 472	50 003 472	49 753 455	50 253 490	49 088 325	- 915 147
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	1 563	45 001 563	44 776 555	45 226 570	44 492 813	- 508 750
26.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	8 681	50 008 681	49 758 637	50 258 724	50 246 172
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	6 250	45 006 250	44 781 219	45 231 281	45 170 023
27.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	10 417	50 010 417	49 760 365	50 260 469	50 125 545
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	7 813	45 007 813	44 782 773	45 232 852	45 515 311	507 499
28.9.2022	Main Refinancing	28.9.2022	5.10.2022	1.25 %	35 000 000	-	35 000 000	34 825 000	35 175 000	35 045 775.00
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	9 375	45 009 375	44 784 328	45 234 422	44 997 612,88
29.9.2022	Main Refinancing	28.9.2022	5.10.2022	1.25 %	35 000 000	1 215	35 001 215	34 826 209	35 176 221	34 987 050,00
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	10 938	45 010 938	44 785 883	45 235 992	45 015 161,13

Instruction No. 14/2023 BO No. 6/2023 Supplement • 2023/06/21 Topics Markets :: Money Markets
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Mod. 99999940/T – 01/14

Table 3
Global collateral system

Date	Operations to be settled	Start Date	Repayment Date	Interest Rate	Liquidity Provided	Accrued Interest	Total Amount to Cover	Lower Limit of Margin of Variation (*1)	Upper Limit of Margin of Variation (*2)	Market Value Adjusted by Haircut	Additional Coverage Value
21.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	-	50 000 000	49 750 000	Not applicable	50 129 294
22.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	1 736	95 001 736	94 526 727	Not applicable	94 939 876
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	-
23.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	3 472	95 005 035	94 530 010	Not applicable	93 581 138	- 1 423 897
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	1 563
26.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	8 681	95 014 931	94 539 856	Not applicable	95 420 556
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	6 250
27.9.2022	Main Refinancing	21.9.2022	28.9.2022	1.25 %	50 000 000	10 417	95 018 229	94 543 138	Not applicable	95 350 464
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	7 813
28.9.2022	Main Refinancing	28.9.2022	5.10.2022	1.25 %	35 000 000	-	80 009 375	79 609 328	Not applicable	79 800 610
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	9 375
29.9.2022	Main Refinancing	28.9.2022	5.10.2022	1.25 %	35 000 000	1 215	80 012 153	79 612 092	Not applicable	79 759 483
	Longer-term Refinancing	22.9.2022	21.12.2022	1.25 %	45 000 000	10 938

(*1) In a global collateral system, the lower limit of the margin of variation is the minimum limit of the additional coverage value. In practice, most CBs require additional collateral assets whenever the market value adjusted by the haircut falls to a value lower than the total value of the operation to be covered.

(*2) In a global collateral system, the notion of the upper limit of the margin of variation is not relevant, since the counterparty will always aim to have excess collateral assets, in order to minimize operational transactions.

12. The expressions “multicédulas” and “multi-cédulas” are replaced by the expression “multi cédulas”.

13. This Instruction enters into force on June 29, 2023.

14. This Instruction is republished in its entirety, and is available at https://www.bportugal.pt/instrucao/72012.