• LM-8.3 LM-8.3 Operational Issues

    • LM-8.3.1

      Banks must address various operational issues relating to the use of collateral for obtaining liquidity. These include, but are not limited to:

      a) Awareness of the operational and timing requirements associated with accessing the collateral given its physical location;
      b) Understanding the liquidity risks associated with different types of payment and settlement systems (e.g. 'net' systems versus 'gross' systems) and their implications for collateral management; and
      c) Taking into account the implications of obligations embedded in the contractual terms of certain transactions which, when triggered, may reduce the availability of collateral for liquidity risk management. These refer to, for example, margin requirements and triggering events that require a bank to: 1) provide additional collateral as a result of changes in the market valuation of the transactions or in the bank's credit rating or financial position (in the case of derivative transactions), or; 2) hypothecate or deliver additional assets to the pool of underlying assets when the embedded triggering events occur (in the case of securitisation transactions).
      August 2018

    • LM-8.3.2

      Banks must test on a regular basis, and at least annually, the ability to use its source of collateral in repo operations, to ensure its capability of using the securities to obtain the required liquidity, if needed, and assess the market appetite for a particular security, including the related haircut applied to put the operation in place. Banks must also ensure that there are no operational issues that could have an impact on the timing and the feasibility of the operation (e.g. limits to the transferability of the security, in case this is held in a local and foreign branch portfolio).

      August 2018

    • LM-8.3.3

      For collateralised borrowing, banks must maintain all documentation related to the agreement with the counterparties.

      August 2018