PART SEVEN LEVERAGE
Article 429 Calculation of the leverage ratio
1. Institutions shall calculate their leverage ratio in accordance with the methodology set out in paragraphs 2, to3 13and 4.
2. The leverage ratio shall be calculated as an institution's capital measure divided by that institution's total exposure measure and shall be expressed as a percentage.
Institutions shall calculate the leverage ratio at the reporting reference date.
3. For the purposes of paragraph 2, the capital measure shall be the Tier 1 capital.
4. TheFor the purposes of paragraph 2, the total exposure measure shall be the sum of the exposure values of:
(a) assets, referredexcluding toderivative incontracts paragraphlisted 5in unlessAnnex theyII, arecredit deductedderivatives whenand determining the capitalpositions measure referred to in paragraphArticle 3429e, calculated in accordance with Article 429b(1);
(b) derivative contracts listed in Annex II and credit derivatives, referredincluding tothose contracts and credit derivatives that are off-balance-sheet, calculated in paragraphaccordance 9with Articles 429c and 429d;
(c) add-ons for counterparty credit risk of repurchasesecurities financing transactions, including those that are off-balance-sheet, calculated in accordance with Article 429e;
(d) off-balance-sheet items, excluding derivative contracts listed in Annex II, credit derivatives, securities orfinancing commoditiestransactions lendingand positions referred to in Articles 429d and 429g, calculated in accordance with Article 429f;
(e) regular-way purchases or borrowingsales transactionsawaiting settlement, calculated in accordance with Article 429g.
Institutions shall treat long settlement transactions andin marginaccordance lendingwith transactionspoints including(a) thoseto that(d) areof off-balancethe sheetfirst subparagraph, as applicable.
Institutions may reduce the exposure values referred to in Articlepoints 429b;
(a) and (d) of the first subparagraph by the corresponding amount of general credit risk adjustments to on- and off-balance -sheet items, referredrespectively, subject to ina paragraphfloor 10of 0 where the credit risk adjustments have reduced the Tier 1 capital.
5. InstitutionsBy shallway determineof thederogation exposurefrom valuepoint (d) of assetsparagraph 4, excludingthe contractsfollowing listedprovisions shall apply:
(a) a derivative instrument that is considered an off-balance-sheet item in Annexaccordance IIwith andpoint credit(d) derivatives,of paragraph 4 but is treated as a derivative in accordance with the followingapplicable principles:accounting framework, shall be subject to the treatment set out in that point;
(ab) where a client of an institution acting as a clearing member enters directly into a derivative transaction with a CCP and the exposureinstitution valuesguarantees the performance of assetsits meansclient's trade exposures to the CCP arising from that transaction, the institution shall calculate its exposure valuesresulting from the guarantee in accordance with point (b) of paragraph 4, as if that institution had entered directly into the transaction with the client, including with regard to the receipt or provision of cash variation margin.
The treatment set out in point (b) of the first sentencesubparagraph shall also apply to an institution acting as a higher-level client that guarantees the performance of its client's trade exposures.
For the purposes of point (b) of the first subparagraph and of the second subparagraph of this paragraph, institutions may consider an affiliated entity as a client only where that entity is outside the regulatory scope of consolidation at the level at which the requirement set out in point (d) of Article 11192(13); is applied.
6. For the purposes of point (be) of paragraph 4 of this Article and Article 429g, ‘regular-way purchase or sale’ means a purchase or a sale of a security under contracts for which the terms require delivery of the security within the period established generally by law or convention in the marketplace concerned.
7. Unless otherwise expressly provided for in this Part, institutions shall calculate the total exposure measure in accordance with the following principles:
(a) physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce exposurethe valuestotal ofexposure assetsmeasure;
(cb) loansassets shall not be netted with deposits;liabilities.
8. By way of derogation from point (db) repurchaseof transactionsparagraph 7, securitiesinstitutions ormay commoditiesreduce lendingthe exposure value of a pre-financing loan or borrowingan transactionsintermediate loan by the positive balance on the savings account of the debtor to which the loan was granted and only include the resulting amount in the total exposure measure, longprovided settlementthat transactionsall the following conditions are met:
(a) the granting of the loan is conditional upon the opening of the savings account at the institution granting the loan and marginboth lendingthe transactionsloan shalland notthe savings account are regulated by the same sectoral law;
(b) the balance on the savings account cannot be nettedwithdrawn, in part or in full, by the debtor for the entire duration of the loan;
(c) the institution can unconditionally and irrevocably use the balance on the savings account to settle any claim originating under the loan agreement in cases regulated by the sectoral law referred to in point (a), including the case of non-payment by or the insolvency of the debtor.
6‘Pre-financing loan’ or ‘intermediate loan’ means a loan that is granted to the borrower for a limited period of time in order to bridge the borrower's financing gaps until the final loan is granted in accordance with the criteria laid down in the sectoral law regulating such transactions.
Article Institutions429a mayExposures deductexcluded from the total exposure measure
1. setBy outway inof paragraphderogation from Article 429(4), an institution may exclude any of thisthe Articlefollowing exposures from its total exposure measure:
(a) the amounts deducted from Common equityEquity Tier 1 capitalitems in accordance with point (d) of Article 36(1);
(db). the assets deducted in the calculation of the capital measure referred to in Article 429(3);
(c) exposures that are assigned a risk weight of 0 % in accordance with Article 113(6) or (7.);
(d) Competentwhere the institution is a public development credit institution, the exposures arising from assets that constitute claims on central governments, regional governments, local authorities mayor permitpublic ansector entities in relation to public sector investments and promotional loans;
(e) where the institution is not a public development credit institution, the parts of exposures arising from passing-through promotional loans to includeother credit institutions;
(f) the guaranteed parts of exposures arising from export credits that meet both of the following conditions:
(i) the guarantee is provided by an eligible provider of unfunded credit protection in accordance with Articles 201 and 202, including by export credit agencies or by central governments;
(ii) a 0 % risk weight applies to the guaranteed part of the exposure measurein accordance with Article 114(2) or (4) or Article 116(4);
(g) where the institution is a clearing member of a QCCP, the trade exposures of that caninstitution, benefitprovided fromthat they are cleared with that QCCP and meet the treatmentconditions laidset downout in point (c) of Article 113306(61).;
(h) Competentwhere authoritiesthe mayinstitution grantis a higher-level client within a multi-level client structure, the trade exposures to the clearing member or to an entity that permissionserves onlyas a higher-level client to that institution, provided that the conditions set out in Article 305(2) are met and provided that the institution is not obligated to reimburse its client for any losses suffered in the event of default of either the clearing member or the QCCP;
(i) fiduciary assets which meet all the following conditions:
(i) they are recognised on the institution's balance sheet by national generally accepted accounting principles, in accordance with Article 10 of Directive 86/635/EEC;
(ii) they meet the criteria for non-recognition set out in International Financial Reporting Standard (IFRS) 9, as applied in accordance with Regulation (EC) No 1606/2002;
(iii) they meet the criteria for non-consolidation set out in IFRS 10, as applied in accordance with Regulation (EC) No 1606/2002, where applicable;
(j) exposures that meet all the following conditions:
(i) they are exposures to a public sector entity;
(ii) they are treated in accordance with Article 116(4);
(iii) they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (i) for the purpose of funding general interest investments;
(k) the excess collateral deposited at tri-party agents that has not been lent out;
(l) where under the applicable accounting framework an institution recognises the variation margin paid in cash to its counterparty as a receivable asset, the receivable asset, provided that the conditions set out in points (a) to (e) of Article 113429c(63) are met;
(m) the securitised exposures from traditional securitisations that meet the conditions for significant risk transfer set out in Article 244(2);
(n) the following exposures to the institution’s central bank, subject to the conditions set out in paragraphs 5 and 6:
(i) coins and banknotes constituting legal currency in the jurisdiction of the central bank;
(ii) assets representing claims on the central bank, including reserves held at the central bank;
(o) where theythe haveinstitution givenis authorised in accordance with Article 16 and point (a) of Article 54(2) of Regulation (EU) No 909/2014, the approvalinstitution's laidexposures downdue to banking-type ancillary services listed in point (a) of Section C of the Annex to that Regulation which are directly related to the core or ancillary services listed in Sections A and B of that Annex;
(p) where the institution is designated in accordance with point (b) of Article 11354(2) of Regulation (EU) No 909/2014, the institution's exposures due to banking-type ancillary services listed in point (a) of Section C of the Annex to that Regulation which are directly related to the core or ancillary services of a central securities depository, authorised in accordance with Article 16 of that Regulation, listed in Sections A and B of that Annex.
For the purposes of point (m) of the first subparagraph, institutions shall include any retained exposure in the total exposure measure.
2. For the purposes of points (d) and (e) of paragraph 1, ‘public development credit institution’ means a credit institution that meets all the following conditions:
(a) it has been established by a Member State's central government, regional government or local authority;
(b) its activity is limited to advancing specified objectives of financial, social or economic public policy in accordance with the laws and provisions governing that institution, including articles of association, on a non-competitive basis;
(c) its goal is not to maximise profit or market share;
(d) subject to Union State aid rules, the central government, regional government or local authority has an obligation to protect the credit institution's viability or directly or indirectly guarantees at least 90 % of the credit institution's own funds requirements, funding requirements or promotional loans granted;
(e) it does not take covered deposits as defined in point (5) of Article 2(1) of Directive 2014/49/EU or in national law implementing that Directive that may be classified as fixed term or savings deposits from consumers as defined in point (a) of Article 3 of Directive 2008/48/EC of the European Parliament and of the Council ().
For the purposes of point (b) of the first subparagraph, public policy objectives may include the provision of financing for promotional or development purposes to specified economic sectors or geographical areas of the relevant Member State.
For the purposes of points (d) and (e) of the first subparagraph, and without prejudice to the Union State aid rules and the obligations of the Member States thereunder, competent authorities may, upon request of an institution, treat an organisationally, structurally and financially independent and autonomous unit of that institution as a public development credit institution, provided that the unit fulfils all the conditions listed in the first subparagraph and that such treatment does not affect the effectiveness of the supervision of that institution. Competent authorities shall without delay notify the Commission and EBA of any decision to treat, for the purposes of this subparagraph, a unit of an institution as a public development credit institution. The competent authority shall annually review such decision.
3. For the purposes of points (d) and (e) of paragraph 1 and point (d) of paragraph 2, ‘promotional loan’ means a loan granted by a public development credit institution or an entity set up by the central government, regional government or local authority of a Member State, directly or through an intermediate credit institution on a non-competitive, not-for-profit basis, in order to promote the public policy objectives of the central government, regional government or local authority in a Member State.
4. Institutions shall not exclude the trade exposures referred to in points (g) and (h) of paragraph 1 of this Article, where the condition set out in the third subparagraph of Article 429(5) is not met.
5. Institutions may exclude the exposures listed in point (n) of paragraph 1 where all of the following conditions are met:
(a) the institution's competent authority has determined, after consultation with the relevant central bank, and publicly declared that exceptional circumstances exist that warrant the exclusion in order to facilitate the implementation of monetary policies;
(b) the exemption is granted for a limited period of time not exceeding one year;
(c) the institution’s competent authority has determined, after consultation with the relevant central bank, the date when the exceptional circumstances are deemed to have started and publicly announced that date; that date shall be set at the end of a quarter.
6. The exposures to be excluded under point (n) of paragraph 1 shall meet both of the following conditions:
(a) they are denominated in the same currency as the deposits taken by the institution;
(b) their average maturity does not significantly exceed the average maturity of the deposits taken by the institution.
87. By way of derogation from point (d) of Article 92(1), where an institution excludes the exposures referred to in point (n) of paragraph 1 of this Article, it shall at all times satisfy the following adjusted leverage ratio requirement for the duration of the exclusion:
[formula]
where:
aLR = the adjusted leverage ratio;
EMLR = the institution’s total exposure measure as calculated in accordance with Article 429(4), including the exposures excluded in accordance with point (n) of paragraph 1 of this Article, on the date referred to in point (c) of paragraph 5 of this Article; and
CB = the daily average total value of the institution’s exposures to its central bank, institutionscalculated mayover determinethe full reserve maintenance period of the central bank immediately preceding the date referred to in point (c) of paragraph 5, that are eligible to be excluded in accordance with point (n) of paragraph 1.
Article 429b Calculation of the exposure value of cashassets
1. receivablesInstitutions shall calculate the exposure value of assets, excluding derivative contracts listed in Annex II, credit derivatives and cashthe payablespositions referred to in Article 429e in accordance with the following principles:
(a) the exposure values of repurchaseassets means an exposure value as referred to in the first sentence of Article 111(1);
(b) securities financing transactions shall not be netted.
2. A cash pooling arrangement offered by an institution does not violate the condition set out in point (b) of Article 429(7) only where the arrangement meets both of the following conditions:
(a) the institution offering the cash pooling arrangement transfers the credit and debit balances of several individual accounts of entities of a group included in the arrangement (‘original accounts’) into a separate, securitiessingle account and thereby sets the balances of the original accounts to zero;
(b) the institution carries out the actions referred to in point (a) of this subparagraph on a daily basis.
For the purposes of this paragraph and paragraph 3, cash pooling arrangement means an arrangement whereby the credit or commoditiesdebit lendingbalances of several individual accounts are combined for the purposes of cash or borrowingliquidity transactionsmanagement.
3. By way of derogation from paragraph 2 of this Article, longa settlementcash transactionspooling arrangement that does not meet the condition set out in point (b) of that paragraph, but meets the condition set out in point (a) of that paragraph, does not violate the condition set out in point (b) of Article 429(7), provided that the arrangement meets all the following conditions:
(a) the institution has a legally enforceable right to set off the balances of the original accounts through the transfer into a single account at any point in time;
(b) there are no maturity mismatches between the balances of the original accounts;
(c) the institution charges or pays interest based on the combined balance of the original accounts;
(d) the competent authority of the institution considers that the frequency by which the balances of all original accounts are transferred is adequate for the purpose of including only the combined balance of the cash pooling arrangement in the total exposure measure.
4. By way of derogation from point (b) of paragraph 1, institutions may calculate the exposure value of cash receivable and margincash lendingpayable under securities financing transactions with the same counterparty on a net basis only ifwhere all the following conditions are met:
(a) the transactions have the same explicit final settlement date;
(b) the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable in all the following situations:
(i) in the normal course of business;
(ii) and in the event of default, insolvency and bankruptcy;
(c) the counterparties intend to settle on a net, basis or to settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.
5. For the purposes of point (c) of theparagraph first subparagraph4, institutions may consider that a settlement mechanism results in the functional equivalent of net settlement ifonly where, on the settlement date, the net result of the cash flows of the transactions under that mechanism is equal to the single net amount under net settlement.
9. Institutionsand shallall determine the exposurefollowing valueconditions ofare contractsmet:
(a) listedthe intransactions Annexare IIsettled andthrough ofthe creditsame derivativessettlement includingsystem thoseor thatsettlement aresystems off-balanceusing sheet,a incommon accordancesettlement with Article 429a.infrastructure;
10.(b) Institutions shall determine the exposuresettlement valuearrangements ofare off-balance-sheetsupported items,by excludingcash contractsor listedintraday in Annex II, credit derivatives,facilities repurchaseintended transactions,to securitiesensure orthat commoditiesthe lendingsettlement orof borrowingthe transactions, longwill settlementoccur transactionsby andthe marginend lendingof transactions,the inbusiness accordance with Article 111day;
(1c). However,any institutionsissues shallarising notfrom reduce the nominalsecurities valuelegs of thosethe itemssecurities byfinancing specifictransactions creditdo risknot adjustments.
Ininterfere accordance with Article 166(9), where a commitment refers to the extensioncompletion of another commitment, the lowernet settlement of the twocash conversionreceivables factorsand associated with the individual commitment shall be usedpayables.
The exposurecondition valueset ofout low risk off- balance sheet items referred to in Articlepoint 111(1c)(d) shall be subject to a floor equal to 10 % of theirthe nominalfirst value.
11.subparagraph Anis institutionmet thatonly iswhere athe clearingfailure member of aany QCCPsecurities mayfinancing excludetransaction fromin the calculationsettlement ofmechanism themay exposuredelay measuresettlement trade exposures of only the followingmatching items,cash providedleg thator thosemay tradecreate exposuresan areobligation clearedto with that QCCP and meet, at the samesettlement timemechanism, thesupported conditionsby laidan downassociated in Article 306(1)(c):
(a) contracts listed in Annex II;
(b) credit derivatives;
(c) repurchase transactions;
(d) securities or commodities lending or borrowing transactions;
(e) long settlement transactions;
(f) margin lending transactionsfacility.
12. Where anthere institution that is a clearingfailure member of a QCCP guarantees to the QCCPsecurities theleg performance of a clientsecurities thatfinancing enterstransaction directly into derivative transactions with the QCCP, it shall include in the exposuresettlement measuremechanism theat exposure resulting from the guaranteeend as a derivative exposure to the client in accordance with Article 429a.
13. Where national generally accepted accounting principles recognise fiduciary assets on balance sheet, in accordance with Article 10 of Directive 86/635/EEC, those assets may be excluded from the leveragewindow ratio total exposure measure provided that they meet the criteria for non-recognitionsettlement set out in Internationalthe Accountingsettlement Standard (IAS) 39mechanism, asinstitutions applicableshall undersplit Regulationout (EC)this Notransaction 1606/2002, and, whereits applicable,matching thecash criterialeg for non-consolidation set out in International Financial Reporting Standard (IFRS) 10, as applicable under Regulation (EC) No 1606/2002.
14. Competent authorities may permit an institution to exclude from the exposurenetting measureset exposuresand thattreat meetthem allon of the following conditions:
(a) theygross are exposures to a public sector entity;basis.
(b) they are treated in accordance with Article 116(4);
(c)429c theyCalculation ariseof from deposits that the institutionexposure is legally obliged to transfer to the public sector entity referred to in point (a) for the purposes of funding general interest investments.
Article 429a Exposure value of derivatives
1. Institutions shall determinecalculate the exposure value of derivative contracts listed in Annex II and of credit derivatives, including those that are off-balance -sheet, in accordance with the method set out in ArticleSection 274.3 Institutionsof shallChapter apply6 Articleof 299(2)(a)Title forII the determination of thePart potential future credit exposure for credit derivativesThree.
When determiningcalculating the potential future credit exposure of credit derivatives, institutions shall apply the principles laid down in Article 299(2)(a) to all their credit derivatives, not only those assigned to the trading book.
In determining the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295. Cross-productInstitutions netting shall not apply.take Howeverinto account cross-product netting, institutionsbut may net within the product category as referred to in point (25)(c) of Article 272 and credit derivatives whenwhere they are subject to a contractual cross-product netting agreement as referred to in point (c) of Article 295.
Institutions shall include in the total exposure measure sold options even where their exposure value can be set to zero in accordance with the treatment laid down in Article 274(c5).
2. Where the provision of collateral related to derivativesderivative contracts reduces the amount of assets under the applicable accounting framework, institutions shall reverse that reduction.
3. For the purposes of paragraph 1 of this Article, institutions maycalculating deductthe variationreplacement margincost receivedof derivative contracts in cashaccordance fromwith theArticle counterparty275 frommay therecognise currentonly replacementcollateral costreceived portionin ofcash from their counterparties as the exposurevariation valuemargin inreferred soto farin asArticle under275, where the applicable accounting framework the variation margin has not already been recognised the variation margin as a reduction of the exposure value and whenwhere all the following conditions are met:
(a) for trades not cleared through a QCCP, the cash received by the recipient counterparty is not segregated;
(b) the variation margin is calculated and exchanged onat aleast daily basis based on a mark-to-market valuation of derivatives positions;
(c) the variation margin received is in casha iscurrency specified in the samederivative currencycontract, asgoverning themaster currencynetting ofagreement, settlementcredit ofsupport annex to the derivativequalifying contractmaster netting agreement or as defined by any netting agreement with a QCCP;
(d) the variation margin exchangedreceived is the full amount that would be necessary to fully extinguish the mark-to-market exposure of the derivative contract subject to the threshold and minimum transfer amounts that are applicable to the counterparty;
(e) the derivative contract and the variation margin between the institution and the counterparty to that contract are covered by a single netting agreement that the institution may treat as risk-reducing in accordance with Article 295.
Where an institution provides cash collateral to a counterparty and that collateral meets the conditions set out in points (a) to (e) of the first subparagraph, the institution shall consider that collateral as the variation margin posted with the counterparty and shall include it in the calculation of the replacement cost.
For the purposes of point (cb) of the first subparagraph, wherean institution shall be considered to have met the derivativecondition contractset isout subjecttherein towhere athe qualifyingvariation mastermargin nettingis agreement,exchanged on the currencymorning of settlementthe meanstrading anyday currencyfollowing ofthe settlementtrading specifiedday inon which the derivative contract was stipulated, provided that the governingexchange qualifyingis masterbased nettingon agreementthe orvalue of the creditcontract supportat annexthe toend of the qualifyingtrading masterday nettingon agreementwhich the contract was stipulated.
WhereFor underthe purposes of point (d) of the applicablefirst accountingsubparagraph, frameworkwhere ana institutionmargin recognisesdispute arises, institutions may recognise the variationamount marginof paidnon-disputed incollateral cashthat tohas been exchanged.
4. For the counterpartypurposes asof aparagraph receivable1 assetof this Article, itinstitutions mayshall excludenot thatinclude assetcollateral fromreceived in the exposurecalculation measureof providedNICA thatas thedefined conditions in pointspoint (a12a) toof (e)Article 272, except in the case of derivative contracts with clients where those contracts are metcleared by a QCCP.
45. For the purposes of paragraph 31 theof followingthis Article, institutions shall apply:
set the value of the multiplier used in the calculation of the potential future exposure in accordance with Article 278(a1) to one, except in the deductioncase of variationderivative margincontracts receivedwith shallclients bewhere limitedthose contracts are cleared by a QCCP.
6. By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Section 4 or 5 of Chapter 6 of Title II of Part Three to determine the positiveexposure currentvalue replacementof costderivative portioncontracts listed in points 1 and 2 of Annex II, but only where they also use that method for determining the exposure value; of those contracts for the purpose of meeting the own funds requirements set out in Article 92.
(b)Where aninstitutions institutionapply one of the methods referred to in the first subparagraph, they shall not usereduce variationthe total exposure measure by the amount of margin they have received.
Article in429d cashAdditional toprovisions reduceon the potentialcalculation futureof creditthe exposure amount,value includingof forwritten credit derivatives
1. For the purposes of this Article, 298(1)(c)(ii);‘written credit derivative’ means any financial instrument through which an institution effectively provides credit protection including credit default swaps, total return swaps and options where the institution has the obligation to provide credit protection under conditions specified in the options contract.
52. In addition to the treatmentcalculation laid down in paragraphArticle 1429c, for written credit derivatives institutions shall include in the calculation of the exposure value of written credit derivatives the effective notional amounts referenced byin the written credit derivatives reduced by any negative fair value changes that have been incorporated in Tier 1 capital with respect to thethose written credit derivativederivatives.
Institutions Theshall resultingcalculate exposurethe valueeffective maynotional beamount furtherof reducedwritten credit derivatives by adjusting the effective notional amount of athose purchasedderivatives creditto derivativereflect on the sametrue referenceexposure nameof providedthe contracts that allare leveraged or otherwise enhanced by the followingstructure conditionsof arethe met:transaction.
(a)3. forInstitutions singlemay namefully creditor derivatives,partly reduce the creditexposure derivativesvalue purchasedcalculated mustin beaccordance onwith aparagraph reference2 nameby whichthe rankseffective parinotional passuamount withof orpurchased iscredit juniorderivatives, toprovided that all the underlyingfollowing referenceconditions obligationare ofmet:
(a) the writtenremaining creditmaturity derivativeof andthe apurchased credit eventderivative onis theequal seniorto referenceor assetgreater wouldthan resultthe inremaining amaturity creditof event on the subordinatedwritten assetcredit derivative;
(b) wherethe anpurchased institutioncredit purchasesderivative protectionis onotherwise asubject poolto of reference names, the purchasedsame protectionor maymore offsetconservative soldmaterial protectionterms onas athose poolin ofthe referencecorresponding nameswritten onlycredit ifderivative;
(c) the poolpurchased ofcredit referencederivative entitiesis andnot thepurchased levelfrom ofa subordinationcounterparty inthat bothwould transactionsexpose are identical;
(c) the remaininginstitution maturityto ofSpecific theWrong-Way creditrisk, derivativeas purchaseddefined isin equalpoint to(b) orof greaterArticle than291(1);
(d) where the remainingeffective maturitynotional amount of the written credit derivative;
(d) inis determiningreduced theby additionalany exposurenegative change in fair value forincorporated writtenin creditthe derivativesinstitution's Tier 1 capital, the effective notional amount of the purchased credit derivative is reduced by any positive fair value change that has been incorporated in Tier 1 capital with respect to the credit derivative purchased;
(e) for tranched products, the purchased credit derivative purchasedis asnot protectionincluded isin on a referencetransaction obligationthat whichhas ranksbeen equalcleared toby the underlyinginstitution referenceon obligationbehalf of thea writtenclient creditor derivative.
Wherethat thehas notionalbeen amountcleared ofby athe writteninstitution creditin derivativeits isrole notas reduceda byhigher-level theclient notionalin amount of a purchasedmulti-level creditclient derivative,structure institutionsand mayfor deductwhich the individualeffective potentialnotional futureamount exposurereferenced ofby thatthe corresponding written credit derivative is excluded from the total potential future exposure determinedmeasure accordingin toaccordance paragraphwith 1point of(g) thisor Article(h) inof conjunctionthe withfirst Articlesubparagraph 274(2)of or Article 299429a(21)(a), as applicable.
For Inthe casepurpose thatof calculating the potential future credit exposure shall be determined in conjunctionaccordance with Article 298429c(1)(c)(ii), PCEgrossinstitutions may beexclude reducedfrom by the individualnetting potentialset futurethe exposureportion of a written credit derivativesderivative withwhich nois adjustmentnot madeoffset toin accordance with the NGR.
6.first Institutionssubparagraph shallof notthis reduceparagraph theand writtenfor creditwhich derivativethe effective notional amount whereis theyincluded buyin creditthe protectiontotal throughexposure ameasure.
4. totalFor returnthe swappurposes andof recordpoint the(b) netof paymentsparagraph received3, as‘material netterm’ income,means butany docharacteristic notof recordthe anycredit offsettingderivative deteriorationthat inis relevant to the valuevaluation thereof, including the level of subordination, the writtenoptionality, the credit derivativeevents, reflectedthe inunderlying Tierreference 1entity capital.
7.or Inpool case of purchasedentities, creditand derivativesthe onunderlying areference obligation or pool of reference entitiesobligations, institutionswith maythe recogniseexception aof reductionthe accordingnotional toamount paragraphand 5the onresidual writtenmaturity creditof derivativesthe oncredit individualderivative. Two reference names onlyshall ifbe the protectionsame purchasedonly iswhere economicallythey equivalentrefer to buyingthe protectionsame separatelylegal onentity.
5. eachBy way of thederogation individualfrom namespoint in(b) theof pool.paragraph If3, aninstitutions institutionmay purchasesuse apurchased credit derivativederivatives on a pool of reference names, itto mayoffset onlywritten recognisecredit aderivatives reduction on aindividual poolreference ofnames writtenwithin creditthat derivativespool whenwhere the pool of reference entities and the level of subordination in both transactions are identicalthe same.
86. ByInstitutions wayshall ofnot derogationreduce fromthe paragrapheffective 1notional amount of thiswritten Article,credit institutionsderivatives maywhere usethey thebuy methodcredit setprotection outthrough ina Articletotal 275return toswap determineand record the exposurenet payments received as net income, but do not record any offsetting deterioration in the value of contractsthe listedwritten credit derivative in pointsTier 1 andcapital.
7. 2In the case of Annexpurchased IIcredit onlyderivatives whereon theya alsopool useof thatreference methodobligations, forinstitutions determiningmay reduce the exposureeffective valuenotional amount of thosewritten contractscredit forderivatives theon purposesindividual ofreference meetingobligations by the owneffective fundsnotional requirementsamount setof outpurchased incredit Articlederivatives 92.
Whenin institutionsaccordance applywith theparagraph method3 setonly outwhere inthe Articleprotection 275,purchased theyis shalleconomically notequivalent reduceto thebuying exposureprotection measureseparately byon theeach amount of variationthe marginindividual receivedobligations in cashthe pool.
Article 429b429e Counterparty credit risk add-on for repurchase transactions, securities orfinancing commodities lending or borrowing transactions, long settlement transactions and margin lending transactions
1. In addition to the calculation of the exposure value of repurchase transactions, securities orfinancing commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance -sheet in accordance with Article 429429b(51), institutions shall include in the total exposure measure an add-on for counterparty credit risk determinedcalculated in accordance towith paragraph 2 or 3 of this Article, as applicable.
2. ForInstitutions theshall purposescalculate ofthe paragraphadd-on 1, for transactions with a counterparty whichthat are not subject to a master netting agreement that meets the conditions laidset downout in Article 206 the add-on (Ei*)shall be determined on a transaction-by-transaction basis in accordance with the following formula:
[formula]
where:
Ei[formula] = the isadd-on;
i = the index that denotes the transaction;
Ei = the fair value of securities or cash lent to the counterparty under transaction i; and
Ci is = the fair value of cashsecurities or securitiescash received from the counterparty under transaction i.
3.Institutions Formay set
[formula] equal to zero where Ei is the purposescash oflent paragraphto 1,a counterparty and the associated cash receivable is not eligible for the netting treatment set out in Article 429b(4).
3. Institutions shall calculate the add-on for transactions with a counterparty that are subject to a master netting agreement that meets the conditions laidset downout in Article 206, the add-on for those transactions (Ei*) shall be determined on an agreement-by-agreement basis in accordance with the following formula:
[formula]
where:
Ei[formula] = the isadd-on;
i = the index that denotes the netting agreement;
Ei = the fair value of securities or cash lent to the counterparty for the transactions that are subject to master netting agreement i; and
Ci is = the fair value of cashsecurities or securitiescash received from the counterparty that is subject to master netting agreement i.
4. For the purposes of paragraphs 2 and 3, the term counterparty includes also tri-party agents that receive collateral in deposit and manage the collateral in the case of tri-party transactions.
5. By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Article 222, subject to a 20 % floor for the applicable risk weight, to determine the add -on for repurchase transactions, securities orfinancing commodities lending or borrowing transactions, long settlement transactions and margin lending transactions including those that are off-balance -sheet. Institutions may use thisthat method only where they also use it for determiningcalculating the exposure value of those transactions for the purpose of meeting the own funds requirements as set out in points (a), (b) and (c) of Article 92(1).
56. Where sale accounting is achieved for a repurchase transaction under itsthe applicable accounting framework, the institution shall reverse all sales-related accounting entries.
67. Where an institution acts as an agent between two parties in repurchasea transactions, securities orfinancing commoditiestransaction, lendingincluding oran borrowingoff-balance-sheet transactionstransaction, longthe settlementfollowing transactionsprovisions andshall marginapply lendingto transactionsthe includingcalculation thoseof thatthe areinstitution's off-balancetotal sheet,exposure the following applymeasure:
(a) where the institution provides an indemnity or guarantee to aone customerof the parties in the securities financing transaction and the indemnity or counterpartyguarantee is limited to any difference between the value of the security or cash the customerparty has lent and the value of collateral the borrower has provided, itthe institution shall only include in the exposure measure the add-on determinedcalculated in accordance with paragraph 2 or 3, as applicable, in the total exposure measure;
(b) where the institution does not provide an indemnity or guarantee to any of the involved parties, the transaction shall not be included in the total exposure measure;
(c) where the institution is economically exposed to the underlying security or the cash in the transaction beyondto an amount greater than the exposure covered by the add-on, it shall include in the total exposure measure also the full amount of the security or the cash to which it is exposed;
(d) where the institution acting as agent provides an indemnity or guarantee to both parties involved in a securities financing transaction, the institution shall calculate its total exposure measure in accordance with points (a), (b) and (c) separately for each party involved in the transaction.
Article 429f Calculation of the exposure value of off-balance-sheet items
1. Institutions shall calculate, in accordance with Article 111(1), the exposure value of off-balance-sheet items, excluding derivative contracts listed in Annex II, credit derivatives, securities financing transactions and positions referred to in Article 429d.
Where a commitment refers to the extension of another commitment, Article 166(9) shall apply.
2. By way of derogation from paragraph 1, institutions may reduce the credit exposure equivalent amount of an off-balance-sheet item by the corresponding amount of specific credit risk adjustments. The calculation shall be subject to a floor of zero.
3. By way of derogation from paragraph 1 of this Article, institutions shall apply a conversion factor of 10 % to low-risk off-balance-sheet items referred to in point (d) of Article 111(1).
Article 429g Calculation of the exposure equalvalue of regular-way purchases and sales awaiting settlement
1. Institutions shall treat cash related to regular-way sales and securities related to regular-way purchases which remain on the balance sheet until the settlement date as assets in accordance with point (a) of Article 429(4).
2. Institutions that, in accordance with the applicable accounting framework, apply trade date accounting to regular-way purchases and sales which are awaiting settlement shall reverse out any offsetting between cash receivables for regular-way sales awaiting settlement and cash payables for regular-way purchase awaiting settlement allowed under that framework. After institutions have reversed out the accounting offsetting, they may offset between those cash receivables and cash payables where both the related regular-way sales and purchases are settled on a delivery-versus-payment basis.
3. Institutions that, in accordance with the applicable accounting framework, apply settlement date accounting to regular-way purchases and sales which are awaiting settlement shall include in the total exposure measure the full amountnominal value of commitments to pay related to regular-way purchases.
Institutions may offset the securityfull ornominal value of the commitments to pay related to regular-way purchases by the full nominal value of cash receivables related to regular-way sales awaiting settlement only where both of the following conditions are met:
(a) both the regular-way purchases and sales are settled on a delivery-versus-payment basis;
(b) the financial assets bought and sold that are associated with cash payables and receivables are fair valued through profit and loss and included in the institution's trading book.