On 16 February 2021, the European Banking Authority (EBA) issued final guidelines specifying the conditions for the application of the alternative treatment of institutions’ exposures related to ‘tri-party repurchase agreements’ for large exposure purposes. Under the alternative treatment, institutions are allowed to replace the total amount of their exposures to a collateral issuer due to tri-party repurchase agreements facilitated by a tri-party agent, with the full amount of the limits that the institution has instructed the tri-party agent to apply to those exposures.

If institutions perform such a replacement, the Capital Requirements Regulation (CRR) requires them to comply with three conditions, which are further specified in the final guidelines, namely the:

  • Institution must verify that the tri-party agent has in place appropriate safeguards to prevent breaches of the limits instructed by the institution.
  • Competent authority has not expressed to the institution any material concerns.
  • Sum of the limit instructed by the institution to the tri-party agent, and any other exposures of the institution to the collateral issuer does not exceed the limit set out in Article 395(1) of the CRR.

The guidelines will apply from 28 June 2021.