Recognition Of Netting Agreements

From 1 October 2020, banks must use a form to inform BaFin if they want to reduce their credit risks by clearing (see the information box “Netting als Kreditrisikominderungstechnik”). Die BaFin hat einen Entwurf fer die Einreichung von Netting-Meldungen gem-Artikel 295 der Eigenkapitalverordnung (CRR) zur Konsultation vorgelegt. Under section 295 of the RRC, institutions may submit compensation agreements to the supervisory authority for recognition of the risk reduction effect. The form is intended for the least important institutions (LSI), non-crr credit institutions, for which the CRR is applicable in accordance with Section 1A of the German Banking Act (KWG) and to investment companies at risk. The notice deadline for the draft form is March 6, 2020. The entity may recognize that the following types of contractual compensation reduce risk: in the second part of the notification form, the institutions provide information on the nature of the compensation agreement, the applicable legislation and the jurisdiction of the counterparty, including all legal advice of support. Information about the nature of the consideration originally required in the draft consultation is not required in the new notification form. In order to avoid any doubt, it is not necessary to notify the ECB of the changes made to the provisions of the central network which, in the opinion of the credit institution, are not essential or are recommended by the notice or are not covered by the notice, and therefore do not require the appointment of a new or updated legal opinion in accordance with Article 296, paragraph 2, point b), Regulation (EU) No. 575/2013. A change in the existing legislation of a type of compensation agreement already recognised would result in this type of compensation agreement being treated as a new type of compensation agreement and triggering notification. Institutions may only treat the following types of contractual compensation agreements as risk mitigation, in accordance with Article 298, if the compensation agreement has been recognised by the relevant authorities in accordance with Article 296 and if the establishment meets the requirements of Article 297: the notification document has two parts.

The first part deals with the confirmation of the crR`s Section 296 requirements for the recognition of contractual compensation agreements and the obligations under section 297 of the RRC. These confirmations relate to the conditions for the recognition of each compensation agreement – for example, with regard to an exit clause – or the terms of an institution`s internal procedures. legal opinions, written and reasoned, in accordance with BIPRU 13.7.6 R (2) deal with the validity and applicability of the entire contractual cross-compensation agreement, in accordance with its terms and the impact of the compensation agreement on the main provisions of a basic bilateral framework contract; legal advice must be universally recognized as such by the community of law in the United Kingdom, or a protocol of law that properly addresses all relevant issues; other bilateral agreements between a company and its counterpart; and most framework contracts must allow a counterparty to terminate the contract or make arrangements to automatically terminate the contract if. B, for example, one of the counterparties is insolvent or if its credit rating deteriorates. Important for the problem of angry, though tedious network. In order to reduce their capital requirements, institutions may apply a series of credit risk mitigation techniques in accordance with the RRC.