Can you please provide some assistance on clarifying SCR calculation for deposits at bank and deposits at credit institutions? Based on section SCR.5.87. deposits at bank should be treated only in the counterparty default risk where deposits at credit institutions should have spread risk. When you mention deposits at credit institutions you refer to credit unions?
Background of the questionWe provide SCR and TPT reporting to a client and they have queried how we calculate SCR for deposits, certificate of deposits and time deposits. We would like to get some clarification on which deposits we need to classify under a credit institution.
Both “cash at bank" and “deposits with credit institutions" are terminology from Council Directive 91/674/EEC.
In particular Article 12 of that Directive says that deposits should be classified as deposits with credit institutions where there is a time restriction on withdrawal. Where there is no such restriction, those deposits should be classified as cash at bank.
Therefore for SCR purposes the criterion as to whether or not a deposit should be subject to counterparty default risk or spread risk plus market risk concetration risk is whether or not there is a time restriction on withdrawal.