CSDR Public Disclosures
Articles 28 and 40 of Regulation (EU) 2017/390
Clearstream Banking S.A.
Clearstream Banking S.A. has been authorised under Article 54 CSDR to provide banking-type ancillary services on 12 April 2021. In the set of related obligations, Articles 28 and 40 of Regulation (EU) 2017/390 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services require the public disclosure of a comprehensive qualitative statement that specifies how credit risk (Art. 28) and liquidity risk (Art. 40) respectively, including how intraday credit and liquidity risks are measured, monitored and managed on an annual basis.
This public disclosure can be found in the “Pillar III Disclosure Report of Clearstream Banking S.A.” document published under the section “Pillar III Disclosure Report”.
Clearstream Banking AG
Clearstream Banking AG has been authorised under Article 54 CSDR to provide banking-type ancillary services on 24 August 2021. In the set of related obligations, Articles 28 and 40 of Regulation (EU) 2017/390 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services require the public disclosure of a comprehensive qualitative statement that specifies how credit risk (Art. 28) and liquidity risk (Art. 40) respectively, including how intraday credit and liquidity risks are measured, monitored and managed on an annual basis.
This public disclosure can be found in the “Pillar III Disclosure Report of Clearstream Holding” document published under the section “Pillar III Disclosure Report”.
Liquidity risks (including intraday) measurement, monitoring and management: Article 40 of Regulation (EU) 2017/390)
This statement will be part of the 2022 “Pillar III Disclosure Report of Clearstream Holding”. This is a temporary disclosure that will be deleted after the publication of the Report.
CBF’s liquidity requirements are mainly intraday and overnight. CBF is required to mitigate the liquidity risks arising from the provision of CSDR banking-type ancillary services with qualifying liquid resources (QLR) in each relevant currency. The minimum amount of CBF’s available QLR (Cover 2 requirement – minimum requirement) shall at any time at least be sufficient to manage the risk to which CBF would be exposed following the default of at least two participants (including its parent undertakings and subsidiaries) towards which CBF has the highest exposures.
To address the CSDR related liquidity risk requirements, CBF has at its disposal the following QLRs as specified in Article 34 DR 2017/390:
- Own cash (uninvested CBF’s own funds) deposited at the Deutsche Bundesbank in a dedicated account separated from CBF’s participant cash;
- Committed lines of credit or similar arrangements;
- Own assets funded with CBF’s own funds; and
- Appropriated participant collateral in case of the participant’s default.
All sources of liquidity risk are considered for the measurement, monitoring and management of CBF’s liquidity (including intraday) which includes its relations to the entities and linked financial market infrastructures or other entities that may pose liquidity risk to its intraday liquidity flows, that is, treasury counterparties, cash correspondent banks (CCBs), depositories, etc.
For liquidity risk measurement, CBF has put in place effective operational and analytical tools to measure and compare on an ongoing basis its liquid resources to its liquidity needs (intraday, overnight, and multiday period). Concretely, the liquidity metrics required by DR 2017/390 Article 30(1), such as CBF’s available qualifying and non-qualifying liquid resources, as well as additional internally defined metrics are measured on an ongoing basis and used to calculate the appropriate value of intraday funding required. A prudent value of the liquid assets is assessed by considering their quality, concentration, immediate availability and market conditions. Intraday qualifying liquid resources are valued and calibrated under stressed market conditions including all stress scenarios referred to in DR 2017/390 Article 36(7).
The operational and analytical tools used to measure liquidity risks (mentioned above) allow CBF to effectively monitor on a near to real-time basis its actual intraday liquidity positions against its expected activities and available resources based on balances and remaining intraday liquidity capacity. They also allow the monitoring of its intraday and overnight liquidity exposures on an ongoing basis against the maximum intraday liquidity exposure that has been historically recorded.
In practice, to monitor its actual cash balances held with its CCBs, depositories and central bank accounts, CBF captures intraday credit and debit advices received from its agents, intermediaries and central banks and compiles intraday on a near to real-time basis the current actual available cash balances in its Intraday Liquidity Management tool.
This tool is also used by CBF to match its expected liquidity flows (participants’ cash and securities settlement instructions and CBF’s treasury activities) against incoming and outgoing funds to ensure that expected balances and pending entries can be investigated. This operational and analytical Intraday Liquidity Management tool allows on an ongoing basis liquidity management at CBF CCBs, depositories and central banks. The tool produces management reports that support the intraday liquidity management process and issues intraday alerts if defined intraday thresholds at CCB and currency levels are breached.
In addition, CBF runs extreme but plausible scenarios (including, but not limited to, those prescribed under CSDR) to identify and manage the risk of unexpected disruptions to its intraday liquidity flows.
For each currency for which CBF acts as settlement agent, CBF estimates the intraday liquidity inflows and outflows for all banking-type ancillary services provided, anticipates the timing of these flows, and forecasts the intraday liquidity needs that may arise at different periods during the day.
CBF’s liquidity (including intraday) is managed by CBL's Treasury function (via an outsourcing agreement between Clearstream Banking AG (CBF) and Clearstream Banking S.A. (CBL)) per currency and per cash correspondent bank or depository acting as cash agent with the aid of an intraday liquidity management tool. The tool is capable to monitor CBF’s actual cash flows as reported online by its cash correspondent banks / agents, and central banks, using standard Swift reporting capabilities, as well as CBF’s expected forthcoming cash flows from its customers, corporate actions or other activities such as payment flows. A real-time online overview of such flows combined with an automated alerting system ensures that Treasury can detect intraday unsecured exposure to CBF’s cash correspondent banks / agents in excess of predetermined intraday concentration limits as well as intraday overdraft positions and take mitigating actions in due time. These measures aim to protect against liquidity risk which may arise from the temporary failure of a cash correspondent bank / agent or underlying participant. The online overview of flows allows to identify potential liquidity issues and escalate immediately if necessary.
CBF has arranged to acquire sufficient intraday funding to meet its intraday objectives, to manage the timing of its liquidity outflows and to deal with unexpected disruptions of its intraday liquidity flows.
In parallel, CBF assesses a prudent value of its liquid assets deemed sufficient for its intraday exposure by monitoring their quality, concentration, availability and by valuing its qualifying liquid resources under stressed market conditions. CBF has in place appropriate governance on the placement of its liquid assets. These are maintained in separate accounts under the direct management of the liquidity management function and may only be used as source of contingent funds during stress periods.
For managing its ability to provide sufficient liquidity to honour its liquidity management objectives, CBF has put ex-ante measures in place to control the required level of liquidity. A verification that all obligations have been met is done ex post. Any pending payment due to insufficient cash balance requires escalation.
CBF has intraday control procedures in place defining intraday liquidity management processes, timelines, thresholds for escalation to Management and crisis management system alerting the appropriate level of management depending on the seriousness of liquidity incidents.
CBF’s liquidity management policy states the roles and responsibilities when facing a crisis event where day-to-day liquidity generation measures would not be sufficient to cover a liquidity shortage in one or several currencies. The liquidity issue would be escalated to CBF’s Executive Board which can decide in view of the liquidity crisis event to activate exceptional liquidity generation measures listed in CBF’s liquidity contingency funding plan.