asset coverage requirement — the ratio of assets to liabilities as determined in accordance with the national law of a Member State or a third country for credit enhancement purposes in relation to covered bonds (7)

bail-in tool — borrowed from another act; this instrument states no meaning of its own (137)

bucket — a sub-category of positions within one risk class with a similar risk profile to which a risk weight as defined in Subsection 1 of Section 3 is assigned (3)

business day 0 — the business day on which the institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price. 3. Institutions shall notify the competent authorities of the application of the process set out in this Article. Section 3 Risk factor and sensitivity definitions Subsection 1 Risk factor definitions Article 325l General interest rate risk factors 1. For all general interest rate risk factors, including inflation risk and cross-currency basis risk, there shall be one bucket per currency, each containing different types of risk factor. The delta general interest rate risk factors applicable to interest rate-sensitive instruments shall be the relevant risk-free rates per currency and per each of the following maturities: 0,25 years, 0,5 years, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, 30 years. Institutions shall assign risk factors to the specified vertices by linear interpolation or by using a method that is most consistent with the pricing functions used by the independent risk control function of the institution to report market risk or profits and losses to senior management. 2. Institutions shall obtain the… (90)

cash transaction — a transaction in cash, debt instruments or equities, a spot foreign exchange transaction or a spot commodities transaction; however, repurchase transactions, securities or commodities lending transactions, and securities or commodities borrowing transactions, are not cash transactions ‘(5)

CIU — a UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council (*4) or an alternative investment fund (AIF) as defined in point (a) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council (*5) ‘(7)

CMV — the net market value of all the transactions within a netting set gross of any collateral held or posted where positive and negative market values are netted in computing the CMV;’ ‘(12)

collective investment undertaking — borrowed from another act; this instrument states no meaning of its own ‘(7)

committed credit or liquidity facility — a credit or liquidity facility that is irrevocable or conditionally revocable (17)

commodity risk — the risk of losses arising from movements in commodity prices (143)

consolidating supervisor — a competent authority responsible for the exercise of supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU ‘(41)

decomposition — replicating an index by a securitisation of which the underlying exposures in the pool are identical to the single name exposures that compose the index (c)

decomposition with a valuation model — that a single name constituent of a securitisation is valued as the difference between the unconditional value of the securitisation and the conditional value of the securitisation assuming that single name defaults with an LGD of 100 % (a)

default risk weight — the percentage representing the estimated probability of the default of each obligor, according to the creditworthiness of that obligor (f)

deposit broker — a natural person or an undertaking that places deposits from third parties, including retail deposits and corporate deposits but excluding deposits from financial institutions, with credit institutions in exchange of a fee (4)

derivative contracts — the derivative contracts listed in Annex II and credit derivatives (9)

distributable items — the amount of the profits at the end of the last financial year plus any profits brought forward and reserves available for that purpose, before distributions to holders of own funds instruments, less any losses brought forward, any profits which are non-distributable pursuant to Union or national law or the institution's by-laws and any sums placed in non-distributable reserves in accordance with national law or the statutes of the institution, in each case with respect to the specific category of own funds instruments to which Union or national law, institutions' by-laws, or statutes relate; such profits, losses and reserves being determined on the basis of the individual accounts of the institution and not on the basis of the consolidated accounts ‘(128)

EU parent credit institution — an EU parent institution that is a credit institution (29d)

EU parent investment firm — an EU parent institution that is an investment firm (29b)

factoring — a contractual agreement between a business (the ‘assignor’) and a financial entity (the ‘factor’) in which the assignor assigns or sells its receivables to the factor in exchange for the factor providing the assignor with one or more of the following services with regard to the receivables assigned: for the purposes of Title IV, factoring shall be treated as trade finance; an advance of a percentage of the amount of the assigned receivables, generally short term, uncommitted and without automatic roll-over; receivables management, collection and credit protection, whereby, in general, the factor administers the assignor's sales ledger and collects the receivables in the factor's own name (16)

fair value of a netting set — the sum of the fair values of all the transactions included in a netting set. 4. Without prejudice to Article 428ah(2), all derivative contracts listed in points 2(a) to (e) of Annex II that involve a full exchange of principal amounts on the same date shall be calculated on a net basis across currencies, including for the purpose of reporting in a currency that is subject to separate reporting in accordance with Article 415(2), even where those transactions are not included in the same netting set that fulfils the requirements set out in Article 429c(1). 5. Cash received as collateral to mitigate the exposure of a derivative position shall be treated as such and shall not be treated as deposits to which Chapter 3 applies. 6. Competent authorities may decide, with the approval of the relevant central bank, to waive the impact of derivative contracts on the calculation of the net stable funding ratio, including through the determination of the required stable funding factors and of provisions and losses, provided that all the following conditions are met: Where a subsidiary having its head office in a third country benefits from the waiver referred to in the first subparagraph… (116)

financial customer — a customer, including a financial customer belonging to a non-financial corporate group, which performs one or more of the activities listed in Annex I to Directive 2013/36/EU as its main business, or which is one of the following: a credit institution; an investment firm; a securitisation special purpose entity (SSPE); a collective investment undertaking (CIU); a non-open ended investment scheme; an insurance undertaking; a reinsurance undertaking; a financial holding company or mixed-financial holding company; a financial institution; a pension scheme arrangement as defined in point (10) of Article 2 of Regulation (EU) No 648/2012 (1)

financial holding company — a financial institution, the subsidiaries of which are exclusively or mainly institutions or financial institutions, and which is not a mixed financial holding company; the subsidiaries of a financial institution are mainly institutions or financial institutions where at least one of them is an institution and where more than 50 % of the financial institution's equity, consolidated assets, revenues, personnel or other indicator considered relevant by the competent authority are associated with subsidiaries that are institutions or financial institutions ‘(20)

financial institution — an undertaking other than an institution and other than a pure industrial holding company, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36/EU, including a financial holding company, a mixed financial holding company, a payment institution as defined in point (4) of Article 4 of Directive (EU) 2015/2366 of the European Parliament and of the Council (*6), and an asset management company, but excluding insurance holding companies and mixed-activity insurance holding companies as defined, respectively, in points (f) and (g) of Article 212(1) of Directive 2009/138/EC ‘(26)

financial report — for the purposes of Part Eight, a financial report within the meaning of Articles 4 and 5 of Directive 2004/109/EC of the European Parliament and of the Council (*9) (149)

foreign exchange risk — the risk of losses arising from movements in foreign exchange rates (142)

fully guaranteed deposit lending or borrowing transaction — a fully collateralised money market transaction in which two counterparties exchange deposits and a CCP interposes itself between them to ensure the performance of those counterparties' payment obligations (11)

G-SII — a G-SII that has been identified in accordance with Article 131(1) and (2) of Directive 2013/36/EU (133)

G-SII entity — an entity with legal personality that is a G-SII or is part of a G-SII or of a non-EU G-SII (136)

global systemically important institution — borrowed from another act; this instrument states no meaning of its own (133)

gross jump-to-default (gross JTD) amount — the estimated size of the loss or gain that the default of the obligor would produce for a specific exposure (c)

group — a group of undertakings of which at least one is an institution and which consists of a parent undertaking and its subsidiaries, or of undertakings that are related to each other as set out in Article 22 of Directive 2013/34/EU of the European Parliament and of the Council (*8) (138)

hedging set — a group of transactions within a single netting set for which full or partial offsetting is allowed for determining the potential future exposure under the methods set out in Section 3 or 4 of this Chapter ‘(6)

higher-level client — an entity providing clearing services to a lower-level client (7)

IM — any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the period needed to liquidate those transactions, or to re-hedge their market risk, following the default of the counterparty to the transaction or portfolio of transactions (140)

indirect clearing arrangement — an arrangement that meets the conditions set out in the second subparagraph of Article 4(3) of Regulation (EU) No 648/2012 (6)

intermediate loan — 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 429a Exposures excluded from the total exposure measure 1. By way of derogation from Article 429(4), an institution may exclude any of the following exposures from its total exposure measure: 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 (117)

internal hedge — a position that materially offsets the component risk elements between a trading book position and one or more non-trading book positions or between two trading desks ‘(96)

large institution — an institution that meets any of the following conditions: it is a G-SII; it has been identified as an other systemically important institution (O-SII) in accordance with Article 131(1) and (3) of Directive 2013/36/EU; it is, in the Member State in which it is established, one of the three largest institutions in terms of total value of assets; the total value of its assets on an individual basis or, where applicable, on the basis of its consolidated situation in accordance with this Regulation and Directive 2013/36/EU is equal to or greater than EUR 30 billion (146)

large subsidiary — a subsidiary that qualifies as a large institution (147)

level 1 assets — assets of extremely high liquidity and credit quality as referred to in the second subparagraph of Article 416(1) (11)

level 2 assets — assets of high liquidity and credit quality as referred to in the second subparagraph of Article 416(1) of this Regulation; level 2 assets are further subdivided into level 2A and 2B assets as set out in the delegated act referred to in Article 460(1) (12)

LGD — the loss given default of the obligor on an instrument issued by that obligor expressed as a share of the notional amount of the instrument (e)

liquidity buffer — the amount of level 1 and level 2 assets that an institution holds in accordance with the delegated act referred to in Article 460(1) (13)

long exposure — that the default of an issuer or group of issuers leads to a loss for the institution, regardless of the type of instrument or transaction creating the exposure (b)

lower-level client — an entity accessing the services of a CCP through a higher-level client (8)

margin loans — collateralised loans extended to customers for the purpose of taking leveraged trading positions (8)

market risk — the risk of losses arising from movements in market prices, including in foreign exchange rates or commodity prices (141)

material subsidiary — a subsidiary that on an individual or consolidated basis meets any of the following conditions: for the purpose of determining the material subsidiary, where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings shall count as a single subsidiary on the basis of their consolidated situation; the subsidiary holds more than 5 % of the consolidated risk-weighted assets of its original parent undertaking; the subsidiary generates more than 5 % of the total operating income of its original parent undertaking; the total exposure measure, referred to in Article 429(4) of this Regulation, of the subsidiary is more than 5 % of the consolidated total exposure measure of its original parent undertaking (135)

material term — any characteristic of the credit derivative that is relevant to the valuation thereof, including the level of subordination, the optionality, the credit events, the underlying reference entity or pool of entities, and the underlying reference obligation or pool of obligations, with the exception of the notional amount and the residual maturity of the credit derivative. Two reference names shall be the same only where they refer to the same legal entity. 5. By way of derogation from point (b) of paragraph 3, institutions may use purchased credit derivatives on a pool of reference names to offset written credit derivatives on individual reference names within that pool where the pool of reference entities and the level of subordination in both transactions are the same. 6. Institutions shall not reduce the effective notional amount of written credit derivatives where they buy credit protection through a total return swap and record the net payments received as net income, but do not record any offsetting deterioration in the value of the written credit derivative in Tier 1 capital. 7. In the case of purchased credit derivatives on a pool of reference obligations, institutions may… (117)

multi-level client structure — an indirect clearing arrangement under which clearing services are provided to an institution by an entity which is not a clearing member, but is itself a client of a clearing member or of a higher-level client (9)

net jump-to-default (net JTD) amount — the estimated size of the loss or gain that an institution would incur due to the default of an obligor, after offsetting between gross JTD amounts has taken place (d)

net liquidity outflows — the amount which results from deducting an institution's liquidity inflows from its liquidity outflows (14)

NICA — the sum of the volatility-adjusted value of net collateral received or posted, as applicable, to the netting set other than variation margin ‘(12a)

non-EU G-SII — a global systemically important banking group or a bank (G-SIBs) that is not a G-SII and that is included in the list of G-SIBs published by the Financial Stability Board, as regularly updated (134)

non-listed institution — an institution that has not issued securities that are admitted to trading on a regulated market of any Member State, within the meaning of point (21) of Article 4(1) of Directive 2014/65/EU (148)

non-mandatory overcollateralisation — any amount of assets which the institution is not obliged to attach to a covered bond issuance by virtue of legal or regulatory requirements, contractual commitments or for reasons of market discipline, including in particular where the assets are provided in excess of the minimum legal, statutory or regulatory overcollateralisation requirement applicable to the covered bonds under the national law of a Member State or a third country (6)

one way margin agreement — a margin agreement under which an institution is required to post variation margin to a counterparty but is not entitled to receive variation margin from that counterparty or vice-versa ‘(7a)

overshooting — a one-day change in the value of a portfolio composed of all the positions assigned to the trading desk that exceeds the related value-at-risk number calculated on the basis of the institution's alternative internal model in accordance with the following requirements: 2. Institutions shall count daily overshootings on the basis of back-testing of the hypothetical and actual changes in the value of the portfolio composed of all the positions assigned to the trading desk. 3. An institution's trading desk shall be deemed to meet the back-testing requirements where the number of overshootings for that trading desk that occurred over the most recent 250 business days does not exceed any of the following: 4. Institutions shall count daily overshootings in accordance with the following: 5. An institution shall calculate, in accordance with paragraphs 6 and 7 of this Article, the multiplication factor (mc) referred to in Article 325ba for the portfolio of all the positions assigned to the trading desks for which it has been granted permission to use alternative internal models as referred to in Article 325az(2). 6. The multiplication factor (mc) shall be the sum of the value of 1,5 and an… (90)

parent credit institution in a Member State — a parent institution in a Member State that is a credit institution (29c)

parent institution in a Member State — an institution in a Member State which has an institution, a financial institution or an ancillary services undertaking as a subsidiary or which holds a participation in an institution, financial institution or ancillary services undertaking, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State ‘(28)

parent investment firm in a Member State — a parent institution in a Member State that is an investment firm ‘(29a)

PIC — an undertaking or a trust, the owner or beneficial owner of which is either a natural person or a group of closely related natural persons which does not carry out any other commercial, industrial or professional activity and which was set up with the sole purpose of managing the wealth of the owner or owners, including ancillary activities such as segregating the owners' assets from corporate assets, facilitating the transmission of assets within a family or preventing a split of the assets after the death of a member of the family, provided that those ancillary activities are connected to the main purpose of managing the owners' wealth (3)

promotional loan — 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 both of the following conditions are met: 6. The exposures to be excluded under point (n) of paragraph 1 shall meet both of the following conditions: 7. 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: where: Article 429b Calculation of the exposure value of assets 1. Institutions shall… (117)

public development credit institution — a credit institution that meets all the following conditions: 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… (117)

regular-way purchase or sale — 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: 8. By way of derogation from point (b) of paragraph 7, institutions may reduce the exposure value of a pre-financing loan or an intermediate 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, provided that all the following conditions are met: ‘Pre-financing loan’ or (117)

replication — that the combination of individual securitisation index tranches are combined to replicate another tranche of the same index series, or to replicate an untranched position in the index series (b)

reporting currency — the currency of the Member State where the head office of the institution is located (15)

resolution authority — borrowed from another act; this instrument states no meaning of its own ‘(130)

resolution entity — borrowed from another act; this instrument states no meaning of its own (131)

resolution group — borrowed from another act; this instrument states no meaning of its own (132)

retail deposit — a liability to a natural person or to a SME, where the SME would qualify for the retail exposure class under the standardised or IRB approaches for credit risk, or a liability to a company which is eligible for the treatment set out in Article 153(4), and where the aggregate deposits by that SME or company on a group basis do not exceed EUR 1 million (2)

risk class — one of the following seven categories: general interest rate risk; credit spread risk (CSR) for non-securitisation; credit spread risk for securitisation not included in the alternative correlation trading portfolio (non-ACTP CSR); credit spread risk for securitisation included in the alternative correlation trading portfolio (ACTP CSR); equity risk; commodity risk; foreign exchange risk (1)

securities financing transaction — a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction (139)

sensitivity — the relative change in the value of a position, as a result of a change in the value of one of the relevant risk factors of the position, calculated with the institution's pricing model in accordance with Subsection 2 of Section 3 (2)

short exposure — that the default of an issuer or group of issuers leads to a gain for the institution, regardless of the type of instrument or transaction creating the exposure (a)

small and non-complex institution — an institution that meets all the following conditions: it is not a large institution; the total value of its assets on an individual basis or, where applicable, on a consolidated basis in accordance with this Regulation and Directive 2013/36/EU is on average equal to or less than the threshold of EUR 5 billion over the four-year period immediately preceding the current annual reporting period; Member States may lower that threshold; it is not subject to any obligations, or is subject to simplified obligations, in relation to recovery and resolution planning in accordance with Article 4 of Directive 2014/59/EU; its trading book business is classified as small within the meaning of Article 94(1); the total value of its derivative positions held with trading intent does not exceed 2 % of its total on- and off-balance-sheet assets and the total value of its overall derivative positions does not exceed 5 %, both calculated in accordance with Article 273a(3); more than 75 % of both the institution's consolidated total assets and liabilities, excluding in both cases the intragroup exposures, relate to activities with counterparties located in the European Economic Area; the institution… (145)

stress — a sudden or severe deterioration in the solvency or liquidity position of an institution due to changes in market conditions or idiosyncratic factors as a result of which there is a significant risk that the institution becomes unable to meet its commitments as they become due within the next 30 days (10)

trade exposure — a current exposure, including a variation margin due to the clearing member but not yet received, and any potential future exposure of a clearing member or a client, to a CCP arising from contracts and transactions listed in points (a), (b) and (c) of Article 301(1), as well as initial margin ‘(91)

trading book — all positions in financial instruments and commodities held by an institution either with trading intent or to hedge positions held with trading intent in accordance with Article 104 ‘(86)

trading desk — a well-identified group of dealers set up by the institution to jointly manage a portfolio of trading book positions in accordance with a well-defined and consistent business strategy and operating under the same risk management structure (144)

unencumbered assets — assets which are not subject to any legal, contractual, regulatory or other restriction preventing the institution from liquidating, selling, transferring, assigning or, generally, disposing of those assets via an outright sale or a repurchase agreement (5)

unfunded contribution to a default fund — a contribution that an institution that acts as a clearing member has contractually committed to provide to a CCP after the CCP has depleted its default fund to cover the losses it incurred following the default of one or more of its clearing members (10)

written credit derivative — 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. 2. In addition to the calculation laid down in Article 429c, institutions shall include in the calculation of the exposure value of written credit derivatives the effective notional amounts referenced in the written credit derivatives reduced by any negative fair value changes that have been incorporated in Tier 1 capital with respect to those written credit derivatives. Institutions shall calculate the effective notional amount of written credit derivatives by adjusting the notional amount of those derivatives to reflect the true exposure of the contracts that are leveraged or otherwise enhanced by the structure of the transaction. 3. Institutions may fully or partly reduce the exposure value calculated in accordance with paragraph 2 by the effective notional amount of purchased credit derivatives, provided that all the following conditions are met: For the purpose of calculating the potential future… (117)