Actual Distribution — a distribution of market values or exposures at a future time period where the distribution is calculated using historic or realised values such as volatilities calculated using past price or rate changes 17.

advised limit — a limit which has been brought to the knowledge of the obligor. Days past due for credit cards commence on the minimum payment due date. In the case of retail exposures and exposures to public sector entities (PSE) the competent authorities shall set a number of days past due as specified in point 48. In the case of corporate exposures the competent authorities may set a number of days past due as specified in Article 154(7). In the case of retail exposures credit institutions may apply the definition of default at a facility level. In all cases, the exposure past due shall be above a threshold defined by the competent authorities and which reflects a reasonable level of risk 44.

ancillary services undertaking — an undertaking the principal activity of which consists in owning or managing property, managing data-processing services, or any other similar activity which is ancillary to the principal activity of one or more credit institutions (21)

Asset-backed commercial paper (ABCP) programme — a programme of securitisations the securities issued by which predominantly take the form of commercial paper with an original maturity of one year or less 1.

authorisation — an instrument issued in any form by the authorities by which the right to carry on the business of a credit institution is granted (2)

branch — a place of business which forms a legally dependent Part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions (3)

Capital market-driven transaction — any transaction giving rise to an exposure secured by collateral which includes a provision conferring upon the credit institution the right to receive margin frequently 2.

cash assimilated instrument — a certificate of deposit or other similar instrument issued by the lending credit institution (35)

Central counterparty — an entity that legally interposes itself between counterparties to contracts traded within one or more financial markets, becoming the buyer to every seller and the seller to every buyer 2.

Clean-up call option — a contractual option for the originator to repurchase or extinguish the securitisation positions before all of the underlying exposures have been repaid, when the amount of outstanding exposures falls below a specified level 1.

close links — a situation in which two or more natural or legal persons are linked in any of the following ways: participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking; control; or the fact that both or all are permanently linked to one and the same third person by a control relationship (46)

competent authorities — the national authorities which are empowered by law or regulation to supervise credit institutions (4)

contractual cross product netting agreement — a written bilateral agreement between a credit institution and a counterparty which creates a single legal obligation covering all included bilateral master agreements and transactions belonging to different product categories. Contractual cross product netting agreements do not cover netting other than on a bilateral basis. For the purposes of cross product netting, the following are considered different product categories: repurchase transactions, reverse repurchase transactions, securities and commodities lending and borrowing transactions, margin lending transactions, and the contracts listed in Annex IV. The competent authorities may recognise as risk-reducing the following types of contractual netting: bilateral contracts for novation between a credit institution and its counterparty under which mutual claims and obligations are automatically amalgamated in such a way that this novation fixes one single net amount each time novation applies and thus creates a legally binding, single new contract extinguishing former contracts, other bilateral agreements between a credit institution and its counterparty, and contractual cross product netting agreements for credit institutions… (a)

control — the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking (9)

conversion factor — the ratio of the currently undrawn amount of a commitment that will be drawn and outstanding at default to the currently undrawn amount of the commitment, the extent of the commitment shall be determined by the advised limit, unless the unadvised limit is higher (28)

counterparty — any entity (including natural persons) that has the power to conclude a contractual netting agreement and (a)

Counterparty Credit Risk (CCR) — the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows 1.

Covered bonds — borrowed from another act; this instrument states no meaning of its own 68.

credit enhancement — a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection (43)

credit institution — an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or an electronic money institution within the meaning of Directive 2000/46/EC Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (OJ L 275, 27.10.2000, p. 39). (1)

credit risk mitigation — a technique used by a credit institution to reduce the credit risk associated with an exposure or exposures which the credit institution continues to hold (30)

Credit Valuation Adjustment — an adjustment to the mid‐market valuation of the portfolio of transactions with a counterparty. This adjustment reflects the market value of the credit risk due to any failure to perform on contractual agreements with a counterparty. This adjustment may reflect the market value of the credit risk of the counterparty or the market value of the credit risk of both the credit institution and the counterparty 24.

Cross‐Product Netting — the inclusion of transactions of different product categories within the same netting set pursuant to the Cross‐Product Netting rules set out in this Annex 12.

Current Exposure — the larger of zero or the market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy 18.

dilution risk — the risk that an amount receivable is reduced through cash or non‐cash credits to the obligor (24)

Distribution of Exposures — the forecast of the probability distribution of market values that is generated by setting forecast instances of negative net market values equal to zero 15.

Distribution of Market Values — the forecast of the probability distribution of net market values of transactions within a netting set for some future date (the forecasting horizon), given the realised market value of those transactions up to the present time 14.

Effective Expected Exposure (Effective EE) at a specific date — the maximum expected exposure that occurs at that date or any prior date. Alternatively, it may be defined for a specific date as the greater of the expected exposure at that date, or the effective exposure at the previous date 21.

Effective Expected Positive Exposure (Effective EPE) — the weighted average over time of effective expected exposure over the first year, or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set, where the weights are the proportion that an individual expected exposure represents of the entire time interval 23.

EU parent credit institution — a parent credit institution in a Member State which is not a subsidiary of another credit institution authorised in any Member State, or of a financial holding company set up in any Member State (16)

EU parent financial holding company — a parent financial holding company in a Member State which is not a subsidiary of a credit institution authorised in any Member State or of another financial holding company set up in any Member State (17)

Excess spread — finance charge collections and other fee income received in respect of the securitised exposures net of costs and expenses 1.

Expected Exposure (EE) — the average of the distribution of exposures at any particular future date before the longest maturity transaction in the netting set matures 20.

Expected Positive Exposure (EPE) — the weighted average over time of expected exposures where the weights are the proportion that an individual expected exposure represents of the entire time interval. When calculating the minimum capital requirement, the average is taken over the first year or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set 22.

facility grade — a risk category within a rating system's facility scale, to which exposures are assigned on the basis of a specified and distinct set of rating criteria from which own estimates of LGDs are derived. The grade definition shall include both a description of how exposures are assigned to the grade and of the criteria used to distinguish the level of risk across grades 10.

financial holding company — a financial institution, the subsidiary undertakings of which are either exclusively or mainly credit institutions or financial institutions, at least one of such subsidiaries being a credit institution, and which is not a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (OJ L 35, 11.2.2003, p. 1). Directive as amended by Directive 2005/1/EC. (19)

financial institution — an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to carry on one or more of the activities listed in points 2 to 12 of Annex I (5)

fully adjusted exposure value — that calculated under Articles 90 to 93 taking into account the credit risk mitigation, volatility adjustments, and any maturity mismatch (E*). Where this paragraph is applied to a credit institution, points (f), (g), (h), and (o) of Article 113(3) shall not apply to the credit institution in question 1.

funded credit protection — a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the right of the credit institution — in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the counterparty — to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the credit institution (31)

group of connected clients — two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others; or two or more natural or legal persons between whom there is no relationship of control as set out in point (a) but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties (45)

Hedging Set — a group of risk positions from the transactions within a single netting set for which only their balance is relevant for determining the exposure value under the Standardised Method set out in Part 5 7.

home Member State — the Member State in which a credit institution has been authorised in accordance with Articles 6 to 9 and 11 to 14 (7)

host Member State — the Member State in which a credit institution has a branch or in which it provides services (8)

Independent valuer — a person who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process (b)

institutions — borrowed from another act; this instrument states no meaning of its own (6)

Investors' interest — the exposure value of the remaining notional Part of the pool of drawn amounts 19.

Investors' interest — the exposure value of the notional part of the pool of drawn amounts not falling within point (a) plus the exposure value of that part of the pool of undrawn amounts of credit lines, the drawn amounts of which have been sold into the securitisation, not falling within point (b) 70.

Kirb — 8 % of the risk‐weighted exposure amounts that would be calculated under Articles 84 to 89 in respect of the securitised exposures, had they not been securitised, plus the amount of expected losses associated with those exposures calculated under those Articles 1.

lending credit institution — the credit institution which has the exposure in question, whether or not deriving from a loan Article 90

Level A — levels of excess spread less than 133,33 % of the trapping level of excess spread but not less than 100 % of that trapping level 29.

Level B — levels of excess spread less than 100 % of the trapping level of excess spread but not less than 75 % of that trapping level 29.

Level C — levels of excess spread less than 75 % of the trapping level of excess spread but not less than 50 % of that trapping level 29.

Level D — levels of excess spread less than 50 % of the trapping level of excess spread but not less than 25 % of that trapping level and 29.

Level E — levels of excess spread less than 25 % of the trapping level of excess spread 29.

Liquidity facility — the securitisation position arising from a contractual agreement to provide funding to ensure timeliness of cash flows to investors 1.

Long Settlement Transactions — transactions where a counterparty undertakes to deliver a security, a commodity, or a foreign exchange amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date that is contractually specified as more than the lower of the market standard for this particular transaction and five business days after the date on which the credit institution enters into the transaction ANNEX III

loss given default (LGD) — the ratio of the loss on an exposure due to the default of a counterparty to the amount outstanding at default (27)

Margin Agreement — a contractual agreement or provisions of an agreement under which one counterparty shall supply collateral to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level 8.

Margin Lending Transactions — transactions in which a credit institution extends credit in connection with the purchase, sale, carrying or trading of securities. Margin lending transactions do not include other loans that happen to be secured by securities collateral ANNEX III

Margin Period of Risk — the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterpart until that counterpart is closed out and the resulting market risk is re‐hedged 10.

Margin Threshold — the largest amount of an exposure that remains outstanding until one party has the right to call for collateral 9.

Market value — the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value shall be documented in a transparent and clear manner 63.

mixed-activity holding company — a parent undertaking, other than a financial holding company or a credit institution or a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC, the subsidiaries of which include at least one credit institution (20)

Mortgage lending value — the value of the property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. Speculative elements shall not be taken into account in the assessment of the mortgage lending value. The mortgage lending value shall be documented in a transparent and clear manner 64.

Netting Set — a group of transactions with a single counterparty that are subject to a legally enforceable bilateral netting arrangement and for which netting is recognised under Part 7 of this Annex and Articles 90 to 93. Each transaction that is not subject to a legally enforceable bilateral netting arrangement, which is recognised under Part 7 of this Annex, should be interpreted as its own netting set for the purpose of this Annex 5.

obligor grade — a risk category within a rating system's obligor rating scale, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of PD are derived. A credit institution shall document the relationship between obligor grades in terms of the level of default risk each grade implies and the criteria used to distinguish that level of default risk 7.

One‐Sided Credit Valuation Adjustment — a credit valuation adjustment that reflects the market value of the credit risk of the counterparty to the credit institution, but does not reflect the market value of the credit risk of the credit institution to the counterparty 25.

operational risk — the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk (22)

originator — either of the following: an entity which, either itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised; or an entity which purchases a third party's exposures onto its balance sheet and then securitises them (41)

originator's interest — the exposure value of that notional Part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation. To qualify as such, the originator's interest may not be subordinate to the investors' interest 19.

overlapping — that the positions, wholly or partially, represent an exposure to the same risk such that to the extent of the overlap there is a single exposure 5.

parent credit institution in a Member State — a credit institution which has a credit institution or a financial institution as a subsidiary or which holds a participation in such an institution, and which is not itself a subsidiary of another credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State (14)

parent financial holding company in a Member State — a financial holding company which is not itself a subsidiary of a credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State (15)

parent undertaking — a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5 and Chapter 4, a parent undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking (12)

Peak Exposure — a high percentile of the distribution of exposures at any particular future date before the maturity date of the longest transaction in the netting set 19.

probability of default — the probability of default of a counterparty over a one year period (25)

public sector entities — non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non‐commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision (18)

qualifying holding — a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking (11)

Rated position — a securitisation position which has an eligible credit assessment by an eligible ECAI as defined in Article 97 1.

Ratings based method — the method of calculating risk‐weighted exposure amounts for securitisation positions in accordance with Part 4, points 46 to 51 1.

recognised exchanges — exchanges which are recognised as such by the competent authorities and which meet the following conditions: they function regularly; they have rules, issued or approved by the appropriate authorities of the home country of the exchange, defining the conditions for the operation of the exchange, the conditions of access to the exchange as well as the conditions that shall be satisfied by a contract before it can effectively be dealt on the exchange; and they have a clearing mechanism whereby contracts listed in Annex IV are subject to daily margin requirements which, in the opinion of the competent authorities, provide appropriate protection (47)

repurchase agreement — borrowed from another act; this instrument states no meaning of its own (33)

repurchase transaction — any transaction governed by an agreement falling within the definition of ‘repurchase agreement’ or ‘reverse repurchase agreement’ as defined in Article 3(1)(m) of Directive 2006/49/EC (33)

reverse repurchase agreement — borrowed from another act; this instrument states no meaning of its own (33)

Risk Position — a risk number that is assigned to a transaction under the Standardised Method set out in Part 5 following a predetermined algorithm 6.

Risk‐Neutral Distribution — a distribution of market values or exposures at a future time period where the distribution is calculated using market implied values such as implied volatilities 16.

Rollover Risk — the amount by which expected positive exposure is understated when future transactions with a counterpart are expected to be conducted on an ongoing basis. The additional exposure generated by those future transactions is not included in calculation of EPE 26.

Secured lending transaction — any transaction giving rise to an exposure secured by collateral which does not include a provision conferring upon the credit institution the right to receive margin frequently 2.

securities or commodities borrowing — borrowed from another act; this instrument states no meaning of its own (34)

securities or commodities lending — borrowed from another act; this instrument states no meaning of its own (34)

securities or commodities lending or borrowing transaction — any transaction falling within the definition of ‘securities or commodities lending’ or ‘securities or commodities borrowing’ as defined in Article 3(1)(n) of Directive 2006/49/EC (34)

securitisation — a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having the following characteristics: payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; and the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme (36)

securitisation position — an exposure to a securitisation (40)

securitisation special purpose entity (SSPE) — a corporation trust or other entity, other than a credit institution, organised for carrying on a securitisation or securitisations, the activities of which are limited to those appropriate to accomplishing that objective, the structure of which is intended to isolate the obligations of the SSPE from those of the originator credit institution, and the holders of the beneficial interests in which have the right to pledge or exchange those interests without restriction (44)

Servicer — an entity that manages a pool of purchased receivables or the underlying credit exposures on a day-to-day basis. Credit institutions shall have procedures to ensure that ownership over the receivables and cash receipts is protected against bankruptcy stays or legal challenges that could materially delay the lender's ability to liquidate or assign the receivables or retain control over cash receipts 105.

sponsor — a credit institution other than an originator credit institution that establishes and manages an asset-backed commercial paper programme or other securitisation scheme that purchases exposures from third party entities (42)

subsidiary — a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5, and Chapter 4 a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence. All subsidiaries of subsidiary undertakings shall also be considered subsidiaries of the undertaking that is their original parent (13)

Supervisory formula method — the method of calculating risk‐weighted exposure amounts for securitisation positions in accordance with Part 4, points 52 to 54 1.

synthetic securitisation — a securitisation where the tranching is achieved by the use of credit derivatives or guarantees, and the pool of exposures is not removed from the balance sheet of the originator credit institution (38)

traditional securitisation — a securitisation involving the economic transfer of the exposures being securitised to a securitisation special purpose entity which issues securities. This shall be accomplished by the transfer of ownership of the securitised exposures from the originator credit institution or through sub-participation. The securities issued do not represent payment obligations of the originator credit institution (37)

tranche — a contractually established segment of the credit risk associated with an exposure or number of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments (39)

type of security — securities which are issued by the same entity, have the same issue date, the same maturity and are subject to the same terms and conditions and are subject to the same liquidation periods as indicated in points 34 to 59 7.

unfunded credit protection — a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the undertaking of a third party to pay an amount in the event of the default of the borrower or on the occurrence of other specified credit events (32)

Unrated position — a securitisation position which does not have an eligible credit assessment by an eligible ECAI as defined in Article 97 1.