QA2020-116 - Prioritization in T07.00, c0061/c0071

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Feb 01, 2024
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Resolution Reporting Subject Matter Guidance
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QA2020-116

Question


In ISDA Protocol Adherent – Entity (T07.00, c0061) the reporting banks have to choose one of the following three options: - Yes – ISDA Universal Protocol - Yes – ISDA JMP Module - No resolution stay recognition In (T07.00, c0071) there in an additional option: - Yes – Other Agreement’ Which prioritization should be made for the code in “Resolution Stay Recognition – Counterparty” (T07.00, c0071) should be made for the case that a counterparty is affiliated to multiple protocols (JMP, UP, etc.)? Should “JMP Module” only be reported if the respective module corresponds to the legislation applicable for the present business activity?


Response


The Derivatives Tab columns c0061 and c0071 of the LDR aim to identify if for the specific contract reported resolution stay recognition has been contractually agreed between the entity and its counterparty. There may be various ways to achieve such contractual recognition: by adhering of both parties to the ISDA Universal Resolution Stay Protocol or an ISDA Jurisdictional Modular Protocol Module or by entering into other standardised or bilaterally agreed contract amendments. Statutory recognition, which applies within Europe, is not yet covered by the two columns. Therefore, whether a counterparty is an adherent to the ISDA Universal or the Jurisdictional Modular Protocol is only relevant and therefore to be reported in the LDR, if that adherence could actually achieve resolution recognition by the counterparty for the very derivative contract reported in the LDR Tab. With regard to an Austrian bank, for example, c0061 and c0071 should never report “ISDA JMP Module”, because an Austrian Module to the ISDA JMP does not exist. As no Austrian bank is currently adherent to the ISDA Universal Protocol, contractual resolution recognition by the counterparty could also not be effected through the Universal Protocol, hence c0061 and c0071 should not report “Yes - ISDA Universal Protocol” either. Resolution stay recognition by a counterparty to an Austrian bank would therefore be purely statutory (if the contract is governed by EU law), in which case both columns c0061 and c0071 should be reported as no, as no contractual recognition is in place. In case a contractual recognition different from ISDA Protocols is in place between the parties, c0071 should read “Yes Other agreement for resolution stay recognition”. As no corresponding drop-down option has been foreseen in c0061, we would ask to set that value to “No resolution stay recognition”, focusing on the recognition by the counterparty before foreseeing a corresponding option for the LDR 2021. If the counterparty is adherent to both the Universal Protocol and the relevant JMP Module and if both protocols apply to the specific contract reported, the Protocol/Module adhered to more recently should be reported.