Question ID
2016_2765
Legal act
Directive 2014/59/EU (BRRD)
Topic
Resolution financing arrangements
Article
103
Paragraph
7
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Delegated Regulation (EU) 2015/63 - DR on ex ante contributions to resolution financing arrangements
Article/Paragraph
5(1)
Type of submitter
Credit institution
Subject matter
Is collateral from REPO and SBL transactions taken into consideration for the BRRD base calculation?
Question

Could liabilities arising from repos and securities lending and borrowing transactions be netted with the collateral posted what would result in a BRRD base decrease?

Background on the question

An institution does a securities lending transaction in which it posts equity securities (105 USD) to counterparty A and in return receives cash collateral (100 USD). IFRS requires for cash collateral received to be booked on the balance sheet as a liability. This will incur 100 USD of liabilities. Since this liability is backed with the collateral can that be excluded from the BRRD basic annual contribution?

Submission date
Final publishing date
Final answer

Article 5(1) of Delegated Regulation (EU) 2015/63 exempts certain liabilities from the calculation of the basic annual contribution. The scope of such exemptions is to be interpreted narrowly, not going beyond the objective of the exemption.
None of the provisions of Article 5(1) have the objective of exempting collateralised liabilities as such. As a result, liabilities arising from repos and securities lending and borrowing transactions should not be netted with the corresponding collateral in the calculation of the basic annual contribution.

Disclaimer:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Status
Final Q&A
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Directive 2014/59/EU (BRRD) and continues to be relevant.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.