# Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services (Text with EEA relevance), Article 10: Collateral for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) of Regulation (EU) No 909/2014

Extent: E+W+S+N.I.

1. In order for collateral to be considered of the best quality for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) of Regulation (EU) No 909/2014, it shall consist of debt instruments that meet all of the following conditions:
(a) they are issued or explicitly guaranteed by one of the following:
(i) a government;
(ii) a central bank;
(iii) one of the multilateral development banks listed in Article 117 of Regulation (EU) No 575/2013;
(iv) the European Financial Stability Facility or the European Stability Mechanism;
(b) the CSD can demonstrate that they have low credit and market risk based upon its own internal assessment employing a defined and objective methodology that does not exclusively rely on external opinions and that takes into consideration the country risk of the particular country where the issuer is established;
(c) they are denominated in a currency the risks of which the CSD-banking service provider is able to manage;
(d) they are freely transferable without any legal constraint or third party claims that impair their liquidation;
(e) they fulfil one of the following requirements:
(i) they have an active outright sale or repurchase agreement market, with a diverse group of buyers and sellers, including in stressed conditions and to which the CSD-banking service provider has reliable access;
(ii) they can be liquidated by the CSD-banking service provider through a prearranged and highly reliable funding arrangement as referred to in point (e) of Article 59(4) of Regulation (EU) No 909/2014 and specified in Article 38 of this Regulation;
(f) reliable price data on such debt instruments are published on at least a daily basis;
(g) they are readily available and convertible into cash on a same-day basis.
2. In order for collateral, to be considered of a lower quality than that referred to in paragraph 1 for the purposes of point (d) of Article 59(3), and point (d) of Article 59(4) of Regulation (EU) No 909/2014, it shall consist of transferable securities and money market instruments that meet all of the following conditions:
(a) the financial instruments have been issued by an issuer that has low credit risk based on an adequate internal assessment by the CSD-banking service provider, employing 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;
(b) the financial instruments have a low market risk based on an adequate internal assessment by the CSD-banking service provider, employing a defined and objective methodology that does not exclusively rely on external opinions;
(c) they are denominated in a currency the risks of which the CSD-banking service provider is able to manage;
(d) they are freely transferable and without any legal constraint or third party claims that impair their liquidation;
(e) they fulfil one of the following requirements:
(i) they have an active outright sale or repurchase agreement market, with a diverse group of buyers and sellers, to which the CSD-banking service provider can demonstrate reliable access, including in stressed conditions;
(ii) they can be liquidated by the CSD-banking service provider through a prearranged and highly reliable funding arrangement as referred to in point (e) of Article 59(4) of Regulation (EU) No 909/2014 and specified in Article 38 of this Regulation;
(f) they can be liquidated on a same-day basis;
(g) price data on these instruments are publicly available on a close to real-time basis;
(h) they are not issued by any of the following:
(i) the participant providing the collateral, or by an entity that is part of the same group as the participant, except in the case of a covered bond and only where the assets backing that bond are appropriately segregated within a robust legal framework and satisfy the requirements set out in this Article;
(ii) a CSD-banking service provider or an entity that is part of the same group as the CSD-banking service provider;
(iii) an entity whose business involves providing services critical to the functioning of the CSD-banking service provider, unless that entity is a Union central bank or a central bank that issues a currency in which the CSD-banking service provider has exposures;
(i) they are not otherwise subject to significant wrong-way risk in the meaning of Article 291 of Regulation (EU) No 575/2013.

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Source: https://www.legislation.gov.uk/eur/2017/390/article/10 (the official version)
Page: https://openlegislation.uk/eu-regulation-2017-390/article-10
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.