Collateral Quality

Field 2.90 | Matching Date: 2020-04-01 | Tolerance: None | Agent Lender Data Provision: Yes>

Status: Best Practice Finalised, Last Updated: 26/04/2021

Field 2.90 | Matching Date: 2020-04-01 | Tolerance: None | Agent Lender Data Provision: Yes

Description:
Code that classifies the risk of the security used as collateral.

Best Practice:
If Field 2.75 (Type of Collateral Component) is populated with "SECU", at least one code pertaining to the collateral quality shall be provided, of which there are 4 options (x4 alphabetical characters), else the field should be left blank.

ISLA made a recommendation to ESMA that these fields be made non-matching to avoid reconciliation breaks. These breaks would happen where counterparts sourced rating data from different agencies. The recommendation was not accepted.

ESMA Final Report Reporting under Articles 4 and 12 SFTR: 06 January 2020 :

433: A small number of respondents supported reporting the lowest applicable credit quality step as the default option. However, the large majority rejected this approach.

434. ESMA decided to forego this approach and to leave it to market participants to report a value that reflects their internal assessment and what is on their books. However, this is likely to lead to a higher rate of reconciliation breaks. (SFTR-110)