4.5 Communication with competent authorities

Where an institution intends to make use of the alternative treatment with a tri-party agent, it should notify ex-ante the competent authority. The notification should at least comprise the following elements:

• a. a confirmation of its intention to use the alternative treatment;
• b. a description of the main elements of the service agreement;
• c. the identification of the tri-party agent(s) that it intends to use;
• d. a declaration approved by the management body of the institution that the use of the alternative treatment complies with the requirements of these guidelines.

The competent authority should have access to all the information deemed necessary to verify the institution’s adequacy with the requirements of these guidelines. The competent authority should be able to request additional information where necessary.

Where an institution intends to terminate the agreement concluded with a tri-party agent, it should inform the competent authority as soon as possible.

4.5.2 Material concerns expressed by the competent authorities

A material concern about the use of the alternative treatment should be based at least on any of the following reasons: WITH REGARD TO ‘TRI-PARTY REPURCHASE TRANSACTIONS’ AS SPECIFIED IN ARTICLE 403(3) CRR

Material concerns with regard to the institution

• a) the use of the alternative treatment leads or is likely to lead to a breach of the large exposure limits of Article 395(1) of Regulation (EU) No 575/2013;
• b) the institution is not complying with its reporting requirements in accordance with Articles 394 and 430 of Regulation (EU) No 575/2013;
• c) the alternative treatment is not integrated or is only partially integrated in the risk management framework of the institution;
• d) relevant findings from on-site inspections, internal and external audits or other supervisory assessments provide evidence of insufficient internal procedures to manage and/or monitor the use of the alternative treatment in accordance with these guidelines.

Material concerns with regard to the service agreement

• e) the provisions included in the service agreement do not ensure compliance with applicable laws and regulatory requirements, including these guidelines. In particular:
• i. the provisions of the service agreement regarding the revision of the specified limits would make it impossible for an institution to request the timely implementation of changes to prevent a breach of the large exposure limits of Article 395(1) of Regulation (EU) No 575/2013.
• ii. the institution or a legitimate third party do not have the right to audit the services provided by the tri-party agent under the service agreement to verify that the tri-party agent has in place appropriate safeguards to prevent breaches of the limits specified by the institution as referred to in point (b) of Article 403(3) of Regulation (EU) No 575/2013;

Material concerns with regard to the tri-party agent

• f) the tri-party agent is a regulated entity and its authorisation is subsequently withdrawn by its competent authority;
• g) there is evidence that the tri-party agent has not complied with the requirements for the timely introduction of revisions to the specified limits in accordance with the terms of the service agreement, or it has not observed requests from the institution to exclude certain types of collateral or collateral issuers; or its monitoring systems do not provide for accurate and timely management of the specified limits.

4.5.3 Procedure for dealing with a material concern

Upon receipt of the notification set out in section 4.5.1, the competent authority should inform the institution within four weeks if it has any material concerns about the use of the alternative treatment, in which case it should state its reasons. If there are no material WITH REGARD TO ‘TRI-PARTY REPURCHASE TRANSACTIONS’ AS SPECIFIED IN ARTICLE 403(3) CRR

concerns, there does not need to be any further communication regarding that notification.

Institutions should not use the alternative treatment until the competent authority has satisfied itself that the institution has satisfactorily addressed any material concerns.

If an institution is already making use of the alternative treatment and subsequently the competent authority informs the institution that it has material concerns about its use, the institution should cease to use the alternative treatment and provide evidence to the competent authority to that effect.

The institution should only resume the use of the alternative treatment where, within the timeframe set by the competent authority, it has satisfactorily addressed the material concerns and provided evidence to the competent authority to that effect. WITH REGARD TO ‘TRI-PARTY REPURCHASE TRANSACTIONS’ AS SPECIFIED IN ARTICLE 403(3) CRR