General Collateral Indicator impacting Cash Collateral reporting

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Status: For Review, Last Updated: 31/08/2023

Question:
Validation field(s) in scope – 2.18

In current ESMA guidelines, field 2.18 only applies to the securities provided as collateral with the validation rules requiring mandatory population of field (2.18) when the Net Exposure (Field 2.73) is “True” for SLEBs.

The validation rule causes a reporting issue where Cash is used as collateral.

ISLA members concluded that Field 2.18 can be populated with GENE or TTCA for securities used as collateral. However, for Cash collateral, the field should be populated with GENE to avoid data rejections.

Although this is not precisely a challenge, ISLA members concluded that as best practice and short-term solution, field 2.18 should be populated with ‘GENE’ where Cash collateral is used. This should be done to avoid data rejections.

The ISLA SFTR Best Practice on this point is currently “Validation rules (31 Jan 2022) require mandatory population, therefore regarding cash pool collateral a default value of 'GENE' should be used to avoid data rejection”.

Best Practice:
ISLA members propose the following short-term solution:

•Clarification on whether Field 2.18 “General Collateral Indicator” apply only to SECU6 collateral?
and
•Since the current Validation rules do not consider Net Exposure SLEBs against a cash pool, would there be a consideration for agreeing with current ISLA Best Practices5 that GENE can be populated where collateral type is Cash?

Long term solution:

•The current validation rules be revisited to have provisions for a "Blank" value or any other alternative value that could be populated in Field 2.18 for the cash pool’s Net Exposure collateral. (SFTR-816)