Article 37
Unforeseen and potentially uncovered liquidity shortfalls
1.
The CSD-banking service provider shall establish rules and procedures to effect intraday and multiday timely settlement of payment obligations following any individual or combined default among its participants. Those rules and procedures shall provide for any unforeseen and potentially uncovered liquidity shortfall resulting from such default with the view to avoiding unwinding, revoking, or delaying the same-day settlement of payment obligations.
2.
The rules and procedures referred to in paragraph 1 shall ensure that the CSD-banking service provider has access to cash deposits or overnight investments of cash deposits, and has a process in place in order to replenish any liquidity resources that it may employ during a stress event, so that it can continue to operate in a safe and sound manner.
3.
The rules and procedures referred to in paragraph 1 shall include requirements for both of the following:
(a)
an ongoing analysis of evolving liquidity needs to allow the identification of events that may develop into unforeseen and potentially uncovered liquidity shortfalls, including a plan for the renewal of funding arrangements in advance of their expiry;
(b)
a regular practical testing of the rules and procedures themselves.
4.
The rules and procedures referred to in paragraph 1 shall be accompanied by a procedure setting out how the identified potential liquidity shortfalls shall be addressed without undue delay, including, where necessary, by updating the liquidity risk management framework.
5.
The rules and procedures referred to in paragraph 1 shall also detail all of the following:
(a)
how a CSD-banking service provider shall access cash deposits or overnight investments of cash deposits;
(b)
how a CSD-banking service provider shall execute same-day market transactions;
(c)
how a CSD-banking service provider shall draw on prearranged liquidity lines.
6.
The rules and procedures referred to in paragraph 1 shall include a requirement for the CSD-banking service provider to report any liquidity risk that has the potential to cause previously unforeseen and potentially uncovered liquidity shortfalls to:
(a)
the risk committee of the CSD-banking service provider and, where relevant, to the risk committee of the CSD;
(b)
the relevant competent authority referred to in Article 60(1) of Regulation (EU) No 909/2014, in the manner set out in Article 39 of this Regulation.