Question
Where customers have both assets and liability balances within a cash pooling agreement (supported by a credit netting agreement) can the balance within the cash pooling agreement be treated as either a single net asset (Article 425) or a net liability (Article 420) i.e. not treated gross?
Background on the question
Cash pooling within a cash managment product.
Answer
Articles 422(6) and 425(3) of Regulation (EU) No 575/2013 (CRR) permit the netting of inflows and outflows expected over the 30 day horizon from relevant derivative contracts only. Other inflows shall be reported in accordance with Article 425, other outflows shall be reported in accordance with Article 420. Netting within cash pooling agreements for other liquidity flows is not explicitly provided for in CRR for liquidity reporting purposes. Contractual inflows and relevant outflows should be treated individually to determine the applicable inflow and outflow rates.