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Book IV - Collective investment products
Title II - AIFS
Chapter II - Funds open to retail investors
Section 1 - Retail investment funds
Sub-section 4 - Calculation of aggregate risk
Paragraph 2 - Counterparty risk and issuer concentration
Article 422-62 from 21/12/2013

Article 422-62 into force since

  • Version into force since
ELI : /en/eli/fr/aai/amf/rg/article/422-62/20131221/notes

Assets received as collateral by the retail investment fund for the purposes of reducing its counterparty risk arising from a financial contract or the temporary acquisition or transfer of financial instruments pursuant to Article 422-61 shall comply with the following principles at all times:

  1. Any asset received as collateral shall be suitably liquid and capable of being sold quickly at a price that is consistent with respect to the price at which it was valued prior to the sale. Assets received as collateral should normally be traded on highly liquid markets and have a transparent price;

  2. Assets received must be capable of being valued at least once a day.

    Any inability to value assets received as collateral independently would clearly imperil the retail investment fund, particularly if any such valuation is based on a model and these assets are relatively illiquid.

    Where appropriate, the retail investment fund shall apply an appropriate discount to the market value of assets received as collateral.

    Furthermore, if any such assets exhibit a significant risk of volatility, the retail investment fund shall apply particularly prudent discounts;

  3. The credit standing of the issuer shall be a significant criterion in assessing the eligibility of assets received as collateral. Appropriate discounts shall be applied to the market value of assets received as collateral if the issuer does not have a high credit rating;

  4. Any high correlation between the counterparty and the assets received as collateral to reduce the exposure of the retail investment fund to this counterparty must be avoided;

  5. Any high concentration of assets received as collateral from a single issuer, a single sector or a single country entails a clear risk for the retail investment fund;

  6. The asset management company shall have appropriate technical and human resources, particularly as regards operational systems and legal expertise, in order to manage collateral effectively;

  7. Financial collateral involving transfer of title shall be held by the depositary of the retail investment fund. For other types of financial collateral contracts, financial collateral may be held by a third-party depositary if it is subject to prudential supervision and has no link with the financial collateral provider;

  8. It must be possible for collateral to be realised at any time by the retail investment fund, without the need to inform the counterparty or obtain its approval.