where collateral is a proprietary asset of the collecting counterparty, it shall be segregated from the other proprietary assets of the collecting counterparty; where collateral is not proprietary asset of the collecting counterparty, it shall be segregated from the proprietary assets of the posting counterparty; it shall be segregated from the proprietary assets of the third-party holder or custodian. Where the collateral is held by the collecting party or by a third party holder or custodian on behalf of the collecting party, the collecting counterparty shall always provide the posting counterparty with the option to segregate its collateral from the assets of other posting counterparties. The segregation arrangements shall ensure that collateral posted as initial margins are available to the posting counterparty in a timely manner in case the collecting counterparty defaults. A counterparty shall perform an independent legal review in order to verify that the segregation arrangements meet the requirements referred to in paragraphs 1 to 4. A counterparty shall provide documentation to its competent authority supporting the compliance of the arrangements in each jurisdiction and set up policies ensuring the continuous assessment of compliance upon request. Such legal review may be conducted by an internal independent unit, or by an external independent third party. By way of derogation from paragraphs 1 and 2, where cash is collected as initial margin, the counterparties shall deposit it with a third party holder or custodian that is not part of the same group as either of the counterparties or with a central bank. The collecting counterparty shall take into account the credit quality of the third party custodian by using a methodology that does not solely or mechanistically rely on external credit quality assessments. Article 34 Treatment of collected initial margins The collecting counterparty shall not rehypothecate, repledge nor otherwise reuse the collateral collected as initial margin. The requirement laid down in paragraph 1 shall be deemed to be met where a third party holder or custodian reinvests the initial margin received in cash. CHAPTER II Procedures for the counterparties and the relevant competent authorities when applying exemptions for intragroup derivative contracts Article 35 Procedures for the counterparties and the relevant competent authorities The application or notification from a counterparty to the competent authority pursuant to points (6) to (10) of Article 11 of Regulation (EU) No 648/2012 shall be deemed to have been received at the time of receipt by the competent authority of all of the following information:
where collateral is a proprietary asset of the collecting counterparty, it shall be segregated from the other proprietary assets of the collecting counterparty; where collateral is not proprietary asset of the collecting counterparty, it shall be segregated from the proprietary assets of the posting counterparty; it shall be segregated from the proprietary assets of the third-party holder or custodian. Where the collateral is held by the collecting party or by a third party holder or custodian on behalf of the collecting party, the collecting counterparty shall always provide the posting counterparty with the option to segregate its collateral from the assets of other posting counterparties. The segregation arrangements shall ensure that collateral posted as initial margins are available to the posting counterparty in a timely manner in case the collecting counterparty defaults. A counterparty shall perform an independent legal review in order to verify that the segregation arrangements meet the requirements referred to in paragraphs 1 to 4. A counterparty shall provide documentation to its competent authority supporting the compliance of the arrangements in each jurisdiction and set up policies ensuring the continuous assessment of compliance upon request. Such legal review may be conducted by an internal independent unit, or by an external independent third party. By way of derogation from paragraphs 1 and 2, where cash is collected as initial margin, the counterparties shall deposit it with a third party holder or custodian that is not part of the same group as either of the counterparties or with a central bank. The collecting counterparty shall take into account the credit quality of the third party custodian by using a methodology that does not solely or mechanistically rely on external credit quality assessments. Article 34 Treatment of collected initial margins The collecting counterparty shall not rehypothecate, repledge nor otherwise reuse the collateral collected as initial margin. The requirement laid down in paragraph 1 shall be deemed to be met where a third party holder or custodian reinvests the initial margin received in cash. CHAPTER II Procedures for the counterparties and the relevant competent authorities when applying exemptions for intragroup derivative contracts Article 35 Procedures for the counterparties and the relevant competent authorities The application or notification from a counterparty to the competent authority pursuant to points (6) to (10) of Article 11 of Regulation (EU) No 648/2012 shall be deemed to have been received at the time of receipt by the competent authority of all of the following information:
ESAs_2016_21_RTS_on_Risk_Mitigation_LegisWrite.docx