Part 4 – Delivery of the collateral by the collateral provider to the DGS

Under the financial collateral arrangement, the DGS should ensure that the credit institution delivers the low-risk assets to the DGS in accordance with one of the modalities provided in Directive 2002/47/EC, so that the low-risk assets are in the possession or under the control of the DGS.

Such delivery by the credit institution to the DGS should be fulfilled by means of crediting the collateral as follows:

• a. In the case of a security financial collateral arrangement, the low-risk assets provided as collateral should be credited on a securities or cash account
• (i) maintained with custodians or intermediaries that are identified by the designated authority or by the DGS and are able to provide complete, accurate and up-to-date information regarding both the credit institution and the low-risk assets; and (ii) enabling the registration of low-risk assets delivered as collateral by credit institutions pursuant to the security financial collateral arrangement.

In this case, DGSs or designated authorities should only identify custodians or intermediaries that ensure full segregation and protection of the low-risk assets and enable the DGSs’ prompt access upon request in order to prevent any losses to the credit institution or to the DGS due to the default or insolvency of the custodian. They should also make sure that custodians are not allowed to dispose of the low-risk assets provided as collateral and that they have contractually waived any retention right or right of pledge they may otherwise have over the low-risk assets.

• b. In the case of a title transfer financial collateral arrangement, there should be a transfer to the DGS on a securities or cash account held by the DGS enabling registration of low-risk assets delivered as collateral by credit institution pursuant to the title transfer financial collateral arrangement. The designated authority or the DGS should ensure that custodians are not allowed to dispose of the low-risk assets provided as collateral and that they have contractually waived any retention right or right of pledge they may otherwise have over the low-risk assets.

If a DGS is entitled to receive cash deposits from members, cash collateral may be deposited directly with the DGS by the credit institution.