BANK 4.5.7 Eligible financial collateral

(1) The following are eligible financial collateral if they satisfy the criteria in subrule (2):
(a) gold bullion;
(b) cash;

Note For what is included in cash collateral — see rule 4.5.8.
(c) debt securities that are assigned, by an ECRA, a rating of:
(i) for sovereign or non-commercial public sector enterprise securities that are eligible for zero per cent risk-weight — at least BB-;
(ii) for short-term debt securities — at least A-3/P-3; or
(iii) for any other securities — at least BBB—;
(d) subject to subrule (3), debt securities that have not been assigned a rating by an ECRA if:
(i) the securities are issued by a bank (in or outside the QFC) as senior debt and are listed on a recognised exchange;
(ii) all rated issues of the same seniority issued by the bank have a credit rating of at least BBB- (for long-term debt instruments) or A-3/P-3 (for short-term debt instruments); and
(iii) the firm and the holder of the collateral have no information suggesting that the securities should have a rating below BBB- or A-3/P-3;
(e) equities (including convertible bonds) that are included in a main index;
(f) tracker funds, mutual funds and undertakings for collective investments in transferable securities (UCITS) if:
(i) a price for the units is publicly quoted daily; and
(ii) the funds or UCITS are limited to investing in instruments listed in this subrule;
(g) equities (including convertible bonds) that are not included in a main index but are listed on a recognised exchange, and funds and UCITS described in paragraph (f) that include such equities.
(2) For collateral to be eligible financial collateral, it must be lodged for at least the life of the exposure, and must be marked-to-market at least once a month. The release of collateral must be conditional on the repayment of the exposure, but collateral may be reduced in proportion to the amount of any reduction in the exposure.
(3) Collateral in the form of securities issued by the counterparty or a person connected to the counterparty is not eligible financial collateral.
(4) Insurance contracts, put options, and forward sales contracts or agreements are not eligible financial collateral.
Amended by QFCRA RM/2015-3 (as from 1st January 2016).