+28. In the determination of the stress factors to the following assets in the reserve of assets …

28. In the determination of the stress factors to the following assets in the reserve of assets …

In the determination of the stress factors to the following assets in the reserve of assets, issuers ARTs/EMTs should take into account under stress all the following parameters:

  • a. Deposits with credit institutions :
i.the credit quality of the deposit taking institution and expectations of non-performance;
ii.the credit and liquidity quality of the underlying collateral if the deposit is collateralised;
iii.the concentration by the deposit taking institution;
iv.the tenor and early withdrawal options; and
v.the roll-over risk stemming from securities financing transactions, especially repos, where cash is received against non- liquid assets6 .
  • b. Commodities :
i.the extent to which the reserve assets replicate the assets referenced by the tokens; and
ii.the potential delivery risk and costs associated if the redemption is in physical.
  • c. LCR level 1 liquid assets subject to 0% haircuts [in accordance with Commission Delegated Regulation (EU) 2015/61] and, once the relevant delegated regulation applies, as further specified as highly liquid financial instruments in accordance with Article 38(5) Regulation (EU) 2023/1114 :
i.the weighted average residual maturity/duration to take into account their potential sensitivity to interest rate risk and related volatility;
ii.the country risk premium to take into account their related volatility;
iii.the concentration by issuer;
iv.the location of the security (custodian) to take into account any potential challenge for a prompt transfer; and
v.the evolution of the market value of the specific security, to assess their volatility and correlation with respect to the assets referenced.
  • d. LCR level 1 covered bonds [in accordance with Commission Delegated Regulation (EU) 2015/61] and, once the relevant delegated regulation applies, as further as specified as highly liquid financial instruments following Article 38(5) Regulation (EU) 2023/1114:
i.the required LCR haircuts;
ii.the weighted average residual maturity/duration to take into account their potential sensitivity to interest rate risk and related volatility,
iii.their percentage of the reserve of assets,
iv.the concentration by issuer,
v.the location of the security (custodian) to take into account any potential challenge for a prompt transfer,
vi.the evolution of the market value of the specific security, to assess their volatility and correlation with respect to the assets referenced.
  • e. Other highly liquid financial instruments, once the relevant delegated regulation applies, as further specified following Article 38(5) Regulation (EU) 2023/1114:
i.the required LCR haircuts;
ii.the weighted average residual maturity/duration to take into account their potential sensitivity to interest rate risk and related volatility;
iii.their percentage of the reserve of assets;
iv.the concentration by issuer;
v.the location of the security (custodian) to take into account any potential challenge for a prompt transfer; and
vi.the evolution of the market value of the specific security, to assess their volatility and correlation with respect to the assets referenced.
  • b) Parameters related to the calibration of the stress factors of the assets referenced

6 Liquid assets to be understood as those defined in Article 3 (1) and (2) as ‘level 1 assets’ or ‘level 2 assets’, respectivel y, of Commission Delegated Regulation (EU) 2015/61 of 10 October 2014, to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit Institutions (OJ L 011 17.1.2015, p.1).

1. Overview

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1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
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