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QA2019-89 - Collateralized liabilities with zero collateral posted

QA2019-89 - Collateralized liabilities with zero collateral posted

Owned by SRB Services
Feb 01, 2024
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Resolution Reporting Subject Matter Guidance
Guidance Documents Secured-/-Collateralised-Liabilities
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Unique Identifier

QA2019-89

Question


In the case of a liability with the European Investment Bank, according to the clauses of the contract the collateral posted depends on the rating of the entity. At the moment, the collateral posted is 0 because this is according to the terms, but in any moment, when the rating drops, the amount of collateral will be posted. How is this liability classified in T01.00 of the LDR? In r340 uncollateralized secured liabilities because although at the moment the collateral posted is 0, but legally it is a secured liability or in r360 senior unsecured liabilities? In any case, we understand that in the detailed tab T06 it has to be clarified that this liability contains non-standard terms.


Response


The answer depends on the legal terms of the liability contract. If the liability is classified as a secured liability with a varying level of collateralisation, then such a liability should be reported under "uncollateralized secured liabilities ", even in case the amount of collateral posted is zero.