Bank Guarantees as Collaterals

Bank Guarantee for Non-Clearing Member (NCM)

To use bank guarantees as collateral,

• please contact one of the following guarantors and use the template “Template Guarantee NCM EUR”* or “Template Guarantee NCM GBP”* respectively.
• please contact your Clearing Member to give approval for the use of the bank guarantee by using the  “Form O08” published below.

Bank Guarantee for DCP Clearing Member (DCP CM)

To use bank guarantees as collateral,

• please contact one of the following guarantors and use the template “Template Guarantee DCP CM EUR”* or “Template Guarantee DCP CM GBP”* respectively.

More details on risk management for DCP CMs can be found here.

* The NCM and the DCP CM will then have the possibility of either (i) contacting the guarantee giving bank directly or (ii) indirectly with a correspondence bank, e.g. to contact its principal bank, which then contacts one of the Institutes approved by ECC out of the following list. The guarantee giving bank remains an ECC accepted institute. ECC does not have any influence on fees incurred with banks involved.

Limitation of the total value of all guarantees per guarantor

ECC sets an absolute upper limit for the total value of all guarantees per guarantor (i.e. the sum of all guarantees for all Non-Clearing Members and DCP Clearing Members per guarantor). This absolute limit is based on ECC's assessment of the guarantor's creditworthiness. The absolute limit is determined as part of the initial acceptance as a guarantor bank and is regularly reassessed by ECC. If the guarantor's creditworthiness deteriorates (e.g. credit rating is downgraded), the guarantor's absolute limit can be lowered. If the new absolute limit is lower than the total value of all existing guarantees for this guarantor, the existing guarantees may no longer be accepted as collateral.  In such a scenario, the most recently provided guarantees would be returned first (last-in-first-out).

Guarantors

The template has been developed with the feedback of the following guarantors, which fulfill ECC’s criteria:

Banks interested in becoming a guarantor for ECCs collateral management service should contact ECC directly via email clearing@ecc.de. ECC will then review and decide upon the acceptance of new guarantors based on ECCs risk assessment and the fulfilment of ECC’s minimum requirements.

Consideration regarding EMIR:

EMIR Article 41 requires that a CCP shall impose, call and collect margins to limit credit exposure resulting from the relevant positions. According to Article 46 such exposure must be covered with highly liquid collateral with minimal market and credit risk. Highly liquid collateral is defined in Annex I to Regulatory Technical Standard 153/2013. Spot Market Initial Margin Requirement is not designed to cover risk from existing positions but from potential credit exposures from potential transactions on spot markets. Therefore, the limitations of Annex I do not apply for spot market initial margin. Furthermore, as in the spot market approach of ECC, transactions are concluded between ECC and the NCM under a guarantee of the CM, the collateral posted by NCM’s to ECC is backed by this guarantee of the CM realizable on a same day basis.

Cash Collateral

ECC accepts EUR as collateral. Regular overnight Initial Margin Calls will be carried out in Euro only. Intraday Margin Calls can be furnished in Euro, USD (exceptional cases only) or securities.

Cash will be debited or credited by ECC to the cash accounts that Clearing Members have communicated to ECC as relevant cash settlement accounts. Interest is paid on cash that is deposited with ECC with the collateral pool that holds the cash overnight.

Deposit

Cash collateral is automatically called overnight into the house collateral pool for house positions (if separate house collateral pool has been opened) and into the Standard Collateral Pool (GOS – General Omnibus Pool) for any other positions.  Cash from the Standard Collateral Pool (GOS – General Omnibus Pool) can be allocated to a specific pool (except the house pool) by instructing balance only booking. Such allocations can be made using the sample CSV file here until 11am CET on ECC business days.

Release

Releases of cash from the house collateral pool (if separate house collateral pool has been opened) or the Standard Collateral and the SOS Collateral Pool are made automatically overnight. Cash from the house pool can be released on request of the Clearing Member before the intraday cut-off time. Releases of cash from any other pool are requested as follows:

Forms

Cash Collateral can be managed in C7 GUI by the Clearing Member. In backup cases, Clearing Members can use the following forms to instruct ECC.