FREE DELIVERIES

An institution shall be required to hold own funds, as set out in Table 2, if: it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securities, foreign currencies or commodities before receiving payment for them; and in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery. Table 2 Capital treatment for free deliveries Transaction Type Up to first contractual payment or delivery leg From first contractual payment or delivery leg up to four days after second contractual payment or delivery leg From 5 business days post second contractual payment or delivery leg until extinction of the transaction Free delivery No capital charge Treat as an exposure Deduct value transferred plus current positive exposure from own funds In applying a risk weight to free delivery exposures treated according to column 3 of Table 2, institutions using the approach set out in Articles 84 to 89 of Directive 2006/48/EC, may assign PDs to counterparties, for which they have no other non‐trading book exposure, on the basis of the counterparty's external rating. Institutions using own estimates of loss given defaults (‘LGDs’) may apply the LGD set out in point 8 of Part 2 of Annex VII to Directive 2006/48/EC to free delivery exposures treated according to column 3 of Table 2 provided that they apply it to all such exposures. Alternatively, institutions using the approach set out in Articles 84 to 89 of Directive 2006/48/EC may apply the risk weights, as set out in Articles 78 to 83 of that Directive provided that they apply them to all such exposures or may apply a 100 % risk weight to all such exposures. If the amount of positive exposure resulting from free delivery transactions is not material, institutions may apply a risk weight of 100 % to these exposures. In cases of a system wide failure of a settlement or clearing system, competent authorities may waive the capital requirements calculated as set out in points 1 and 2 until the situation is rectified. In this case, the failure of a counterparty to settle a trade shall not be deemed a default for purposes of credit risk.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-10 · Text as adopted (Official Journal); later amendments are not incorporated in this text.