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ESRB publishes advice on eligibility of collateral under EMIR

On 31 July 2012, in accordance with Article 46(3) of EMIR, the European Systemic Risk Board (“ESRB”) submitted advice to the European Securities and Markets Authority (“ESMA”) regarding:

  • the type of eligible collateral that can be considered highly liquid;
  • the haircuts to apply to asset values; and
  • the conditions under which commercial bank guarantees may be accepted by CCPs as collateral.

The type of collateral that could be considered highly liquid

The advice from the ESRB states that CCPs should have a “high degree of certainty” that the transferability and value of collateral are:

  • unencumbered by rights granted in favour of third parties;
  • ensured via dispossession of the collateral giver;
  • not subject to re-characterisation risk; and
  • not voidable during insolvency proceedings against a clearing member or collateral giver.

In addition, CCPs should have appropriate legal and operational safeguards to ensure that cross-border collateral can be used in a timely manner

The acceptance by CCPs of financial instruments issued by a clearing member and posted as collateral by another clearing member should be limited or subject to higher haircuts.  Any such collateral should only be acceptable if it is listed and publicly traded.


Haircuts should be set in a manner that is prudent, conservative, transparent and predictable.  Haircut practices should seek to minimise pro-cyclical increases in times of financial stress.  A mechanistic reliance on ratings provided by credit rating agencies should be avoided.

The conditions under which commercial bank guarantees may be accepted as collateral

Commercial bank guarantees should be subject to a limited use and a lower concentration ratio than that applicable to other eligible collateral.

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