Article 14
Collateral concentration limits
1.
A CSD-banking service provider shall have policies and procedures on collateral concentration limits in place that include the following:
(a)
policies and procedures to be followed where any breach of the concentration limits occurs;
(b)
the risk mitigation measures to be applied where the concentration limits defined in the policies are exceeded;
(c)
the timing of the expected implementation of measures under point (b).
2.
The concentration limits within the total amount of collateral collected (‘collateral portfolio’) shall be set by taking into account all of the following criteria:
(a)
individual issuers considering their group structure;
(b)
country of the issuer;
(c)
type of issuer;
(d)
type of asset;
(e)
settlement currency;
(f)
collateral with credit, liquidity and market risk above minimum levels;
(g)
the eligibility of the collateral for the CSD-banking service provider to have access to routine credit at the central bank of issue;
(h)
each borrowing participant;
(i)
all borrowing participants;
(j)
financial instruments issued by issuers of the same type in terms of economic sector, activity, geographic region;
(k)
the level of credit risk of the financial instrument or of the issuer determined by an internal assessment by the CSD-banking service provider, based on a defined and objective methodology that does not exclusively rely on external opinions and that takes into consideration the risk arising from the establishment of the issuer in a particular country;
(l)
the liquidity and the price volatility of the financial instruments.
3.
A CSD-banking service provider shall ensure that no more than 10 % of its intraday credit exposure is guaranteed by any of the following:
(a)
a single credit institution;
(b)
a third country financial institution that is subject to and complies with prudential rules that are at least as stringent as those provided in Directive 2013/36/EU and Regulation (EU) No 575/2013, in accordance with Article 114(7) of that Regulation;
(c)
a commercial entity that is part of the same group as the institution referred to in either point (a) or (b).
4.
Where calculating the collateral concentration limits referred to in paragraph 2, a CSD-banking service provider shall aggregate its total exposure to a single counterparty resulting from the amount of the cumulative credit lines, deposit accounts, current accounts, money-market instruments, and reverse repurchase facilities utilised by the CSD-banking service provider.
5.
Where determining the collateral concentration limit for a CSD-banking service provider's exposure to an individual issuer, the CSD-banking service provider shall aggregate and treat as a single risk its exposure to all financial instruments issued by the issuer or by a group entity, explicitly guaranteed by the issuer or by a group entity.
6.
A CSD-banking service provider shall ensure the adequacy of its collateral concentration limit policies and procedures at all times. It shall review its collateral concentration limits at least annually and whenever a material change occurs that affects the CSD-banking service provider's risk exposure.
7.
A CSD-banking service provider shall inform the borrowing participants of the applicable collateral concentration limits and of any amendment to those limits pursuant to paragraph 6.