Article 25
Potential residual credit exposures
1.
The policies and procedures referred to in Article 18(1) shall ensure that any potential residual credit exposures are managed, including in the situations where the post-liquidation value of the collateral and other equivalent financial resources are not sufficient to cover the credit exposures of the CSD-banking service provider.
2.
Such policies and procedures shall:
(a)
specify how potentially uncovered credit losses are allocated, including repayment of any funds that a CSD-banking service provider may borrow from liquidity providers to cover liquidity gaps related to such losses;
(b)
include an ongoing assessment of evolving market conditions related to the post-liquidation value of the collateral or of other equivalent financial resources that may develop into a potential residual credit exposure;
(c)
specify that the assessment referred to in point (b) shall be accompanied by a procedure setting out:
(i)
the measures that shall be taken to address the market conditions referred to in point (b);
(ii)
the timing of the measures referred to in point (i);
(iii)
any updates of the credit risk management framework as a result of those market conditions referred to in point (b).
3.
The risk committee of the CSD-banking service provider and, where relevant, the risk committee of the CSD shall be informed of any risks that may cause potential residual credit exposures and the competent authority referred to in Article 60(1) of Regulation (EU) No 909/2014 shall be promptly informed of such risks.
4.
The market and activity developments affecting intraday credit risk exposures shall be analysed and reviewed every six months and reported to the risk committee of the CSD-banking service provider and, where relevant, to the risk committee of the CSD.