NBB Circular NBB_2021_09: EBA Guidelines on Alternative Treatment for Tri-Party Repo Exposures under Article 403(3) CRR

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Circulaire
Brussels, 28 May 2021
Reference: NBB_2021_09 your contact:
Nicolas Staner tel. +32 2 221 44 69
Nicolas.Staner@nbb.be

Guidelines of the European Banking Authority (EBA) of 15 February 2021 specifying the conditions for the application of the alternative treatment of institutions' exposures related to 'tri-party repo transactions', referred to in Article 403, paragraph 3, of Regulation (EU) No 575/2013 (CRR) for large exposures.

Scope
This circular applies to credit institutions, stockbroking companies, and liquidation bodies and bodies assimilated to liquidation bodies under Belgian law (hereinafter 'institution' or 'institutions'), both on a consolidated basis and on a solo basis.

Summary/Objectives
The EBA Guidelines EBA/GL/2021/01 (hereinafter 'the EBA guidelines on the alternative treatment provided for in Article 403, paragraph 3') specify the conditions that an institution should comply with if it decides to resort to the alternative treatment referred to in Article 403, paragraph 3, of Regulation (EU) No 575/2013 (CRR) regarding tri-party repo transactions facilitated by a tri-party agent, including the conditions and frequency applicable for setting, monitoring, and revising the limits referred to in Article 403, paragraph 3, point b), of said Regulation No 575/2013, for the purpose of applying the substitution approach referred to in Article 403, paragraph 1, point b), of that Regulation. This circular specifies the NBB's approach regarding less significant institutions (LSI). It is recommended that significant institutions subject to direct supervision by the ECB follow this circular to the extent that the ECB does not publish guidelines on this matter.

Circulaire – Page 2/2 NBB_2021_09 – 28 May 2021

Madam, Sir,

The National Bank of Belgium wishes to indicate by this circular that the EBA guidelines specifying the conditions for the application of the alternative treatment of institutions' exposures related to 'tri-party repo transactions', referred to in Article 403, paragraph 3, of Regulation (EU) No 575/2013 (CRR) for the purpose of applying the substitution approach referred to in Article 403, paragraph 1, point b), of that Regulation, are integrated into its supervisory practice.

These guidelines apply from 28 June 2021 to institutions' exposures towards issuers of collateral resulting from tri-party repo transactions (tri-party repo agreements) facilitated by a tri-party agent.

To be able to apply the alternative treatment provided for in the aforementioned Article 403, paragraph 3, institutions are required to put in place internal governance measures, ensure that the tri-party agent puts in place appropriate safeguard measures to avoid any non-compliance with the limits specified by the institution to that agent for securities issued by the collateral issuer, set, revise, and monitor said limits with the tri-party agent, and ensure that the use of the alternative treatment does not lead to the institution's non-compliance with the large exposure limits referred to in Article 395, paragraph 1, of Regulation (EU) No 575/2013. The EBA guidelines also provide provisions regarding communication with the supervisory authority.

The EBA guidelines concerning the alternative treatment provided for in Article 403, paragraph 3 can be consulted on the EBA website at the following link:
https://www.eba.europa.eu/regulation-and-policy/large-exposures/guidelines-conditions-applicationalternative-treatment-institutions%E2%80%99-exposures-related-tri-party or on the NBB website (www.nbb.be).

A copy of this circular is sent to the auditor(s), approved auditor(s) of your institution.

Please accept, Madam, Sir, the assurance of my distinguished consideration.

Pierre Wunsch
Governor