In accordance with the General Instructions of Annex III
IV of the ITS on asset encumbrance reporting under Article 100 of Regulation (EU) No 575/2013, it is outlined that, for the purpose of Annex XVII IV and Annex XVI of Regulation 680/2014 on Supervisory Reporting of institutions, an asset shall be treated as encumbered if it has been pledged or if it is subject to any form of arrangement to secure, collateralise or credit enhance any transaction from which it cannot be freely withdrawn. It is noted that assets pledged that are subject to any contractual or regulatory restrictions, or which impact on ratings of bonds in any way in withdrawal, such as for instance assets that by virtue of legal, regulatory or contractual provisions require prior approval before withdrawal or replacement by other assets, should be considered encumbered. In line with this provision, assets which are not subject to such regulatory and contractual restrictions and that are subject to an operational process alone for release, may be considered unencumbered. When the withdrawal of assets from the cover pool would impact the rating of an ECAI for a covered bond in any way, there is a presumption that the assets cannot be freely withdrawn.
This answer has been modified on 01/10/2015 to correct inaccurate references to Annexes of Regulation (EU) No 680/2014 and Regulation (EU) 2015/79 as well as an erroneous punctuation mark.