Division 1 A commercial bank guarantee, subject to limits agreed with the competent authority, shall meet the following conditions to be accepted as collateral under Article 46(1) of Regulation (EU) No 648/2012:

it is issued to guarantee a non-financial clearing member;

it has been issued by an issuer that the CCP can demonstrate to the competent authority that it has low credit risk based upon an adequate internal assessment by the CCP. In performing such assessment the CCP shall employ a defined and objective methodology that shall not fully rely on external opinions and that takes into consideration the risk arising from the establishment of the issuer in a particular country;

it is denominated in one of the following currencies:

1. (i)

   a currency the risk of which the CCP can demonstrate to the competent authorities that it is able to adequately manage;

2. (ii)

   a currency in which the CCP clears contracts, in the limit of the collateral required to cover the CCP’s exposures in that currency;

it is irrevocable, unconditional and the issuer cannot rely on any legal or contractual exemption or defence to oppose the payment of the guarantee;

it can be honoured, on demand, within the period of liquidation of the portfolio of the defaulting clearing member providing it without any regulatory, legal or operational constraint;

it is not issued by:

1. (i)

   an entity that is part of the same group as the non-financial clearing member covered by the guarantee;

2. (ii)

   an entity whose business involves providing services critical to functioning of the CCP, unless that entity is an EEA central bank or a central bank of issue of a currency in which the CCP has exposures;

it is not otherwise subject to significant wrong-way risk;

it is fully backed by collateral that meets the following conditions:

1. (i)

   it is not subject to wrong way risk based on a correlation with the credit standing of the guarantor or the non-financial clearing member, unless that wrong way risk has been adequately mitigated by haircutting of the collateral;

2. (ii)

   the CCP has prompt access to it and it is bankruptcy remote in case of the simultaneous default of the clearing member and the guarantor.

the suitability of the guarantor has been ratified by the board of the CCP after a full assessment of the issuer and of the legal, contractual and operational framework of the guarantee in order to have a high level of comfort on the effectiveness of the guarantee, and notified to the competent authority.