CRR Article 162(2)(d) allows for the application of maturity floored at five (5) days to SFTs “which are subject to a master netting agreement” and does not explicitly require the master netting agreement to qualify as an eligible form of credit risk mitigation as specified under CRR Article 206.

CRR Article 206 details the requirements for a master netting agreement to qualify as an eligible form of credit mitigation. The requirements of Article 206 encompass requirements on the eligibility of the collateral (article 207(2) to (4)) and other conditions (article 206 a) to c)). By detailing these requirements, the regulatory framework acknowledges that a master netting agreement could exist, with or without meeting all conditions of Article 206. It means that a master netting agreement could meet the criteria on the eligibility of financial collateral for SFT, but not qualify as an eligible form of credit risk mitigation. 

A master netting agreement not satisfying all the requirements of Article 206 but meeting the requirements on the eligibility of the collateral, remains a valid contract protecting the bank by linking each SFT to its associated collateral. We understand that this interpretation could be extended to Article 162(2)(d), allowing a maturity floored at five (5) days to SFTs conducted under such master netting agreement.

This interpretation would have an impact on the CRR3 Basic approach for CVA risk. Applying a maturity floor of 1 year to SFT that are typically short-term by nature, would lead to particularly non-economic impact.