CC&G’s Investment Policy is written in accordance with the requirements prescribed by EMIR, by the Regulatory Technical Standards (RTS) from ESMA and EBA and by CPSS-IOSCO2 Principles for Market Infrastructure.
In Particular, the Art. 47 of EMIR identifies the key principles that the investment activity of the CCP must follow.
The CC&G Investment Policy’s outlines the investment framework, designed to facilitate the identification and the assessment of all investment risks to which CC&G is subject to so as to ensure an efficient management of CC&G’s portfolio in line with the company’s risk appetite.
With the approval of this Investment Policy, CC&G’s Board of Directors defines the guidelines that the company must respect while investing the Cash posted by its Clearing Members and its own funds.
The continuous monitoring of all risk types and the continuous verification of the adequacy of the limits and procedures in place is fundamental to ensure a correct management of the investments.
In order to do so, the Investment Policy is subject to at least an annual review.
The main goals of this policy are to:
- Outline the governance, defining the internal rules and procedures, for the creation of a transparent and efficient management framework;
- Ensure full compliance to the CC&G’s risk appetite on investments, defined periodically by the Board of Directors, so as maintain an adequate level of liquid resources and to protect the company’s Regulatory Capital;
- Describe the control system in place, articulated in several layers and designed to ensure full separation between operational and control functions;
- Determine streamlined rules to identify the set of eligible financial instruments to be included in the investment portfolio;
- Identify and detail the main risk types to which the investment portfolio may be subject to;
- Define the guidelines to be followed in order to manage all risks, complying with the main applicable regulation and the Group policies, specifying the rules to be implemented while investing Cash.
CC&G limits its investments to highly liquid financial instruments, as indicated in ESMA RTS 153/2013, art. 43. Such instruments are issued or expressly guaranteed by a State, by a Central Bank, by Multilateral Development Banks, pursuant to Regulation N. 575/2013 and by the European Mechanism of Financial Stabilization or by the European Stability Mechanism.
The Investment Policy allows to invest the available cash with many Sovereign Countries, guaranteeing a sufficient geographic distribution. Furthermore, the credit risk of the issuers is evaluated utilizing an internal objective methodology “Sovereign Risk Framework” that carefully assesses such risk. The Sovereign/Supranational bonds must have a minimum Internal Rating to be eligible for investments.
Regarding deposits of cash, CC&G may make deposits in cash with Credit Institutions (each one has a specific maximum operating limit) authorized pursuant to Directive 2006/48/EC having a final rating - determined on he basis of the Internal Rating Model for Counterparties - not lower than a minimum threshold.
The same rating threshold method is also applied for all the counterparties CC&G is trading with (i.e. triparty repo and outright portfolio).
The investment activity is always driven by the objective of maximizing portfolio’s return through best execution and efficient risks mitigation. Besides that, all rules implemented by CC&G in the management of investments aim at minimizing portfolio losses in order to protect the capital base of the company.
Specific monitoring tools, such as the Liquidity plan, as well as tailor-made in-house systems enable an efficient management of the investments considering all CC&G’s liquidity needs , in ordinary as well as in stressed market conditions.
It is worth noting that, in case of temporary shortage of liquidity due to a time mismatch between inflows and outflows, CC&G has the possibility to access the Central Bank intraday refinancing by pledging securities.
The measurement of Liquidity Risk allows a daily check on CC&G’s liquidity position in standard and stressed Market Conditions, and provides with indications about drifts from the expected values in order to set up appropriate corrective actions.