ECC maintains a strict investment policy that determines the re-investment of cash collateral provided by Clearing Members (member cash deposits) and investment of ECC’s own financial resources.
ECC shall invest member cash deposits and own financial resources only in highly liquid financial instruments with minimal market and credit risk. Eligible instruments are:
- Repo / Reverse Repo Transaction
- Deposits (Central Bank or Central Government)
- Deposits (Commercial Bank)
- Nostro Balances
Available funds shall be primarily deposited with the central bank or placed on a secured basis, with reverse repo being the preferred instrument. The tenor of investments is currently restricted to overnight. Current account/overnight cash investments are also permissible. For currencies where no access to a central bank’s standing deposit facility has been granted, uninvested funds shall be placed among several credit institutions to avoid concentration risk.
Each counterparty shall fulfill minimum requirements, which include among other things:
- All types of current or deposits accounts or investments are allowed only with financial institutions
- A valid investment-grade rating must be available
- The counterparty shall be located within the EU, UK, Switzerland, Norway or USA
ECC established a comprehensive set of limits that govern the investment activities. ECC’s investment policy is subject to review and approval by the Risk Committee.