(74)

in Chapter 6 of Title II of Part Three, Sections 3, 4 and 5 are replaced by the following: ‘ Section 3 Standardised approach for counterparty credit risk Article 274 Exposure value 1. An institution may calculate a single exposure value at netting set level for all the transactions covered by a contractual netting agreement where all the following conditions are met: Where any of the conditions set out in the first subparagraph are not met, the institution shall treat each transaction as if it was its own netting set. 2. Institutions shall calculate the exposure value of a netting set under the standardised approach for counterparty credit risk as follows: 3. The exposure value of a netting set that is subject to a contractual margin agreement shall be capped at the exposure value of the same netting set not subject to any form of margin agreement. 4. Where multiple margin agreements apply to the same netting set, institutions shall allocate each margin agreement to the group of transactions in the netting set to which that margin agreement contractually applies to and calculate an exposure value separately for each of those grouped transactions. 5. Institutions may set to zero the exposure value of a netting set that satisfies all the following conditions: 6. In a netting set, institutions shall replace a transaction which is a finite linear combination of bought or sold call or put options with all the single options that form that linear combination, taken as an individual transaction, for the purpose of calculating the exposure value of the netting set in accordance with this Section. Each such combination of options shall be treated as an individual transaction in the netting set in which the combination is included for the purpose of calculating the exposure value. 7. The exposure value of a credit derivative transaction representing a long position in the underlying may be capped to the amount of outstanding unpaid premium provided it is treated as its own netting set that is not subject to a margin agreement. Article 275 Replacement cost 1. Institutions shall calculate the replacement cost RC for netting sets that are not subject to a margin agreement, in accordance with the following formula: 2. Institutions shall calculate the replacement cost for single netting sets that are subject to a margin agreement in accordance with the following formula: 3. Institutions shall calculate the replacement cost for multiple netting sets that are subject to the same margin agreement in accordance with the following formula: where: For the purposes of the first subparagraph, NICAMA may be calculated at trade level, at netting set level or at the level of all the netting sets to which the margin agreement applies depending on the level at which the margin agreement applies. Article 276 Recognition and treatment of collateral 1. For the purposes of this Section, institutions shall calculate the collateral amounts of VM, VMMA, NICA and NICAMA, by applying all the following requirements: 2. For the calculation of the volatility-adjusted value of collateral posted referred to in point (d) of paragraph 1 of this Article, institutions shall replace the formula set out in Article 223(2) with the following formula: 3. For the purposes of point (d) of paragraph 1, institutions shall set the liquidation period relevant for the calculation of the volatility-adjusted value of any collateral received or posted in accordance with one of the following time horizons: Article 277 Mapping of transactions to risk categories 1. Institutions shall map each transaction of a netting set to one of the following risk categories to determine the potential future exposure of the netting set referred to in Article 278: 2. Institutions shall conduct the mapping referred to in paragraph 1 on the basis of the primary risk driver of a derivative transaction. The primary risk driver shall be the only material risk driver of a derivative transaction. 3. By way of derogation from paragraph 2, institutions shall map derivative transactions that have more than one material risk driver to more than one risk category. Where all the material risk drivers of one of those transactions belong to the same risk category, institutions shall only be required to map that transaction once to that risk category on the basis of the most material of those risk drivers. Where the material risk drivers of one of those transactions belong to different risk categories, institutions shall map that transaction once to each risk category for which the transaction has at least one material risk driver, on the basis of the most material of the risk drivers in that risk category. 4. Notwithstanding paragraphs 1, 2 and 3, when mapping transactions to the risk categories listed in paragraph 1, institutions shall apply the following requirements: 5. EBA shall develop draft regulatory technical standards to specify: EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. Article 277a Hedging sets 1. Institutions shall establish the relevant hedging sets for each risk category of a netting set and assign each transaction to those hedging sets as follows: For the purposes of point (a) of the first subparagraph of this paragraph, transactions mapped to the interest rate risk category that have an inflation variable as the primary risk driver shall be assigned to separate hedging sets, other than the hedging sets established for transactions mapped to the interest rate risk category that do not have an inflation variable as the primary risk driver. Those transactions shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is denominated in the same currency. 2. By way of derogation from paragraph 1 of this Article, institutions shall establish separate individual hedging sets in each risk category for the following transactions: For the purposes of point (a) of the first subparagraph of this paragraph, institutions shall assign transactions to the same hedging set of the relevant risk category only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is identical. For the purposes of point (b) of the first subparagraph, institutions shall assign transactions to the same hedging set of the relevant risk category only where the pair of risk drivers in those transactions as referred to therein is identical and the two risk drivers contained in this pair are positively correlated. Otherwise, institutions shall assign transactions referred to in point (b) of the first subparagraph to one of the hedging sets established in accordance with paragraph 1, on the basis of only one of the two risk drivers referred to in point (b) of the first subparagraph. 3. Institutions shall make available upon request by the competent authorities the number of hedging sets established in accordance with paragraph 2 of this Article for each risk category, with the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), or the pair of risk drivers of each of those hedging sets and with the number of transactions in each of those hedging sets. Article 278 Potential future exposure 1. Institutions shall calculate the potential future exposure of a netting set as follows: where: For the purpose of this calculation, institutions shall include the add-on of a given risk category in the calculation of the potential future exposure of a netting set where at least one transaction of the netting set has been mapped to that risk category. 2. The potential future exposure of multiple netting sets that are subject to one margin agreement, as referred in Article 275(3), shall be calculated as the sum of the potential future exposures of all the individual netting sets as if they were not subject to any form of a margin agreement. 3. For the purposes of paragraph 1, the multiplier shall be calculated as follows: where: Article 279 Calculation of the risk position For the purpose of calculating the risk category add-ons referred to in Articles 280a to 280f, institutions shall calculate the risk position of each transaction of a netting set as follows: Article 279a Supervisory delta 1. Institutions shall calculate the supervisory delta as follows: 2. For the purposes of this Section, a long position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3) means that the market value of the transaction increases when the value of that risk driver increases and a short position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3) means that the market value of the transaction decreases when the value of that risk driver increases. 3. EBA shall develop draft regulatory technical standards to specify: EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. Article 279b Adjusted notional amount 1. Institutions shall calculate the adjusted notional amount as follows: 2. Institutions shall determine the notional amount or number of units of the underlying instrument for the purpose of calculating the adjusted notional amount of a transaction referred to in paragraph 1 as follows: 3. Institutions shall convert the adjusted notional amount of a transaction into their reporting currency at the prevailing spot exchange rate where the adjusted notional amount is calculated under this Article from a contractual notional amount or a market price of the number of units of the underlying instrument denominated in another currency. Article 279c Maturity Factor 1. Institutions shall calculate the maturity factor as follows: 2. For the purposes of paragraph 1, the remaining maturity shall be equal to the period of time until the next reset date for transactions that are structured to settle outstanding exposure following specified payment dates and where the terms are reset in such a way that the market value of the contract shall be zero on those specified payment dates. Article 280 Hedging set supervisory factor coefficient For the purpose of calculating the add-on of a hedging set as referred to in Articles 280a to 280f, the hedging set supervisory factor coefficient ‘є’ shall be the following: Article 280a Interest rate risk category add-on 1. For the purposes of Article 278, institutions shall calculate the interest rate risk category add-on for a given netting set as follows: where: 2. Institutions shall calculate the interest rate risk category add-on for hedging set j as follows: where: 3. For the purpose of calculating the effective notional amount of hedging set j, institutions shall first map each transaction of the hedging set to the appropriate bucket in Table 2. They shall do so on the basis of the end date of each transaction as determined under point (a) of Article 279b(1): Table 2 Institutions shall then calculate the effective notional amount of hedging set j in accordance with the following formula: where: where: Article 280b Foreign exchange risk category add-on 1. For the purposes of Article 278, institutions shall calculate the foreign exchange risk category add-on for a given netting set as follows: where: 2. Institutions shall calculate the foreign exchange risk category add-on for hedging set j as follows: where: where: Article 280c Credit risk category add-on 1. For the purposes of paragraph 2, institutions shall establish the relevant credit reference entities of the netting set in accordance with the following: 2. For the purposes of Article 278, institution shall calculate the credit risk category add-on for a given netting set as follows: where: 3. Institutions shall calculate the credit risk category add-on for hedging set j as follows: where: 4. Institutions shall calculate the add-on for the credit reference entity k as follows: where: 5. Institutions shall calculate the supervisory factor applicable to the credit reference entity k as follows: Article 280d Equity risk category add-on 1. For the purposes of paragraph 2, institutions shall establish the relevant equity reference entities of the netting set in accordance with the following: 2. For the purposes of Article 278, institutions shall calculate the equity risk category add-on for a given netting set as follows: where: 3. Institutions shall calculate the equity risk category add-on for hedging set j as follows: where: 4. Institutions shall calculate the add-on for the equity reference entity k as follows: where: Article 280e Commodity risk category add-on 1. For the purposes of Article 278, institutions shall calculate the commodity risk category add-on for a given netting set as follows: where: 2. For the purpose of calculating the add-on for a commodity hedging set of a given netting set in accordance with paragraph 4, institutions shall establish the relevant commodity reference types of each hedging set. Commodity derivative transactions shall be assigned to the same commodity reference type only where the underlying commodity instrument of those transactions has the same nature, irrespective of the delivery location and quality of the commodity instrument. 3. By way of derogation from paragraph 2, competent authorities may require an institution which is significantly exposed to the basis risk of different positions sharing the same nature as referred to in paragraph 2 to establish the commodity reference types for those positions using more characteristics than just the nature of the underlying commodity instrument. In such a situation, commodity derivative transactions shall be assigned the same commodity reference type only where they share those characteristics. 4. Institutions shall calculate the commodity risk category add-on for hedging set j as follows: where: 5. Institutions shall calculate the add-on for the commodity reference type k as follows: where: Article 280f Other risks category add-on 1. For the purposes of Article 278, institutions shall calculate the other risks category add-on for a given netting set as follows: where: 2. Institutions shall calculate the other risks category add-on for hedging set j as follows: where: Section 4 Simplified standardised approach for counterparty credit risk Article 281 Calculation of the exposure value 1. Institutions shall calculate a single exposure value at netting set level in accordance with Section 3, subject to paragraph 2 of this Article. 2. The exposure value of a netting set shall be calculated in accordance with the following requirements: Section 5 Original exposure method Article 282 Calculation of the exposure value 1. Institutions may calculate a single exposure value for all the transactions within a contractual netting agreement where all the conditions set out in Article 274(1) are met. Otherwise, institutions shall calculate an exposure value separately for each transaction, which shall be treated as its own netting set. 2. The exposure value of a netting set or a transaction shall be the product of 1,4 times the sum of the current replacement cost and the potential future exposure. 3. The current replacement cost referred to in paragraph 2 shall be calculated as follows: In order to calculate the current replacement cost, institutions shall update current market values at least monthly. 4. Institutions shall calculate the potential future exposure referred to in paragraph 2 as follows: For calculating the potential exposure of interest-rate derivatives and credit derivatives in accordance with points b(i) and (b)(ii), an institution may choose to use the original maturity instead of the residual maturity of the contracts.’; the netting agreement belongs to one of the types of contractual netting agreements referred to in Article 295; the netting agreement has been recognised by competent authorities in accordance with Article 296; the institution has fulfilled the obligations laid down in Article 297 in respect of the netting agreement. | Exposure value = α · (RC + PFE) where: RC = the replacement cost calculated in accordance with Article 275; and PFE = the potential future exposure calculated in accordance with Article 278; α = 1,4. the netting set is solely composed of sold options; the current market value of the netting set is at all times negative; the premium of all the options included in the netting set has been received upfront by the institution to guarantee the performance of the contracts; the netting set is not subject to any margin agreement. | RC = max{CMV – NICA, 0} | RC = max{CMV – VM – NICA, TH + MTA – NICA, 0} where: RC = the replacement cost; VM = the volatility-adjusted value of the net variation margin received or posted, as applicable, to the netting set on a regular basis to mitigate changes in the netting set's CMV; TH = the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and MTA = the minimum transfer amount applicable to the netting set under the margin agreement. RC | = | the replacement cost; i | = | the index that denotes the netting sets that are subject to the single margin agreement; CMVi | = | the CMV of netting set i; VMMA | = | the sum of the volatility-adjusted value of collateral received or posted, as applicable, to multiple netting sets on a regular basis to mitigate changes in their CMV; and NICAMA | = | the sum of the volatility-adjusted value of collateral received or posted, as applicable, to multiple netting sets other than VMMA. where all the transactions included in a netting set belong to the trading book, only collateral that is eligible under Articles 197 and 299 shall be recognised; where a netting set contains at least one transaction that belongs to the non-trading book, only collateral that is eligible under Article 197 shall be recognised; collateral received from a counterparty shall be recognised with a positive sign and collateral posted to a counterparty shall be recognised with a negative sign; the volatility-adjusted value of any type of collateral received or posted shall be calculated in accordance with Article 223; for the purposes of that calculation, institutions shall not use the method set out in Article 225; the same collateral item shall not be included in both VM and NICA at the same time; the same collateral item shall not be included in both VMMA and NICAMA at the same time; any collateral posted to the counterparty that is segregated from the assets of that counterparty and, as a result of that segregation, is bankruptcy remote in the event of the default or insolvency of that counterparty shall not be recognised in the calculation of NICA and NICAMA. | CVA = C · (1 + HC + Hfx) where: CVA = the volatility-adjusted value of collateral posted; and C = the collateral; Hc and Hfx are defined in accordance with Article 223(2). one year for the netting sets referred to in Article 275(1); the margin period of risk determined in accordance with point (b) of Article 279c(1) for the netting sets referred to in Article 275(2) and (3). interest rate risk; foreign exchange risk; credit risk; equity risk; commodity risk; other risks. where the primary risk driver of a transaction, or the most material risk driver in a given risk category for transactions referred to in paragraph 3, is an inflation variable, institutions shall map the transaction to the interest rate risk category; where the primary risk driver of a transaction, or the most material risk driver in a given risk category for transactions referred to in paragraph 3, is a climatic conditions variable, institutions shall map the transaction to the commodity risk category. the method for identifying transactions with only one material risk driver; the method for identifying transactions with more than one material risk driver and for identifying the most material of those risk drivers for the purposes of paragraph 3. transactions mapped to the interest rate risk category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is denominated in the same currency; transactions mapped to the foreign exchange risk category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is based on the same currency pair; all the transactions mapped to the credit risk category shall be assigned to the same hedging set; all the transactions mapped to the equity risk category shall be assigned to the same hedging set; transactions mapped to the commodity risk category shall be assigned to one of the following hedging sets on the basis of the nature of their primary risk driver or the most material risk driver in the given risk category for transactions referred to in Article 277(3): energy; metals; agricultural goods; other commodities; climatic conditions; transactions mapped to the other risks category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is identical. transactions for which the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is either the market implied volatility or the realised volatility of a risk driver or the correlation between two risk drivers; transactions for which the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is the difference between two risk drivers mapped to the same risk category or transactions that consist of two payment legs denominated in the same currency and for which a risk driver from the same risk category of the primary risk driver is contained in the other payment leg than the one containing the primary risk driver. PFE | = | the potential future exposure; a | = | the index that denotes the risk categories included in the calculation of the potential future exposure of the netting set; AddOn(a) | = | the add-on for risk category a calculated in accordance with Articles 280a to 280f, as applicable; and multiplier | = | the multiplication factor calculated in accordance with the formula referred to in paragraph 3. multiplier = | | 1 if z ≥ 0 if | Floorm = 5 %; | y = 2 · (1 – Floorm) · ΣaAddOn(a) z = | | CMV – NICA for the netting sets referred to in Article 275(1) CMV – VM – NICA for the netting sets referred to in Article 275(2) CMVi – NICAi for the netting sets referred to in Article 275(3) NICAi | = | the net independent collateral amount calculated only for transactions that are included in netting set i. NICAi shall be calculated at trade level or at netting set level depending on the margin agreement. | RiskPosition = δ · AdjNot · MF where: δ = the supervisory delta of the transaction calculated in accordance with the formula laid down in Article 279a; AdjNot = the adjusted notional amount of the transaction calculated in accordance with Article 279b; and MF = the maturity factor of the transaction calculated in accordance with the formula laid down in Article 279c. for call and put options that entitle the option buyer to purchase or sell an underlying instrument at a positive price on a single or multiple dates in the future, except where those options are mapped to the interest rate risk category, institutions shall use the following formula: where: Table 1 Institutions using the forward price of the underlying instrument of an option shall ensure that: δ | = | the supervisory delta; sign | = | – 1 where the transaction is a sold call option or a bought put option; sign | = | + 1 where the transaction is a bought call option or sold put option; type | = | – 1 where the transaction is a put option; type | = | + 1 where the transaction is a call option; N(x) | = | the cumulative distribution function for a standard normal random variable meaning the probability that a normal random variable with mean zero and variance of one is less than or equal to x; P | = | the spot or forward price of the underlying instrument of the option; for options the cash flows of which depend on an average value of the price of the underlying instrument, P shall be equal to the average value at the calculation date; K | = | the strike price of the option; T | = | the expiry date of the option; for options which can be exercised at one future date only, the expiry date is equal to that date; for options which can be exercised at multiple future dates, the expiry date is equal to the latest of those dates; the expiry date shall be expressed in years using the relevant business day convention; and σ | = | the supervisory volatility of the option determined in accordance with Table 1 on the basis of the risk category of the transaction and the nature of the underlying instrument of the option. Risk category | Underlying instrument | Supervisory volatility Foreign exchange | All | 15 % Credit | Single-name instrument | 100 % Multiple-names instrument | 80 % Equity | Single-name instrument | 120 % Multiple-names instrument | 75 % Commodity | Electricity | 150 % Other commodities (excluding electricity) | 70 % Others | All | 150 % the forward price is consistent with the characteristics of the option; the forward price is calculated using a relevant interest rate prevailing at the reporting date; the forward price integrates the expected cash flows of the underlying instrument before the expiry of the option; for tranches of a synthetic securitisation and a nth-to-default credit derivative, institutions shall use the following formula: where: sign = | | + 1 where credit protection has been obtained through the transaction – 1 where credit protection has been provided through the transaction A | = | the attachment point of the tranche; for a nth-to-default credit derivative transaction based on reference entities k, A = (n – 1)/k; and D | = | the detachment point of the tranche; for a nth-to-default credit derivative transaction based on reference entities k, D = n/k; for transactions not referred to in point (a) or (b), institutions shall use the following supervisory delta: δ = | | + 1 if the transaction is a long position in the primary risk driver or in the most material risk driver in the given risk category – 1 if the transaction is a short position in the primary risk driver or in the most material risk driver in the given risk category in accordance with international regulatory developments, the formula that institutions shall use to calculate the supervisory delta of call and put options mapped to the interest rate risk category compatible with market conditions in which interest rates may be negative as well as the supervisory volatility that is suitable for that formula; the method for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3). for transactions mapped to the interest rate risk category or the credit risk category, institutions shall calculate the adjusted notional amount as the product of the notional amount of the derivative contract and the supervisory duration factor, which shall be calculated as follows: where: The start date of a transaction is the earliest date at which at least a contractual payment under the transaction, to or from the institution, is either fixed or exchanged, other than payments related to the exchange of collateral in a margin agreement. Where the transaction has already been fixing or making payments at the reporting date, the start date of a transaction shall be equal to 0. Where a transaction involves one or more contractual future dates on which the institution or the counterparty may decide to terminate the transaction prior to its contractual maturity, the start date of a transaction shall be equal to the earliest of the following: Where a transaction has a financial instrument as the underlying instrument that may give rise to contractual obligations additional to those of the transaction, the start date of a transaction shall be determined on the basis of the earliest date at which the underlying instrument starts fixing or making payments. The end date of a transaction is the latest date at which a contractual payment under the transaction, to or from the institution, is or may be exchanged. Where a transaction has a financial instrument as an underlying instrument that may give rise to contractual obligations additional to those of the transaction, the end date of a transaction shall be determined on the basis of the last contractual payment of the underlying instrument of the transaction. Where a transaction is structured to settle an outstanding exposure following specified payment dates and where the terms are reset so that the market value of the transaction is zero on those specified dates, the settlement of the outstanding exposure at those specified dates is considered a contractual payment under the same transaction; R | = | the supervisory discount rate; R = 5 %; S | = | the period between the start date of a transaction and the reporting date, which shall be expressed in years using the relevant business day convention; and E | = | the period between the end date of a transaction and the reporting date, which shall be expressed in years using the relevant business day convention. the date or the earliest of the multiple future dates at which the institution or the counterparty may decide to terminate the transaction earlier than its contractual maturity; the date at which a transaction starts fixing or making payments, other than payments related to the exchange of collateral in a margin agreement. for transactions mapped to the foreign exchange risk category, institutions shall calculate the adjusted notional amount as follows: where the transaction consists of one payment leg, the adjusted notional amount shall be the notional amount of the derivative contract; where the transaction consists of two payment legs and the notional amount of one payment leg is denominated in the institution's reporting currency, the adjusted notional amount shall be the notional amount of the other payment leg; where the transaction consists of two payment legs and the notional amount of each payment leg is denominated in a currency other than the institution's reporting currency, the adjusted notional amount shall be the largest of the notional amounts of the two payment legs after those amounts have been converted into the institution's reporting currency at the prevailing spot exchange rate; for transactions mapped to the equity risk category or commodity risk category, institutions shall calculate the adjusted notional amount as the product of the market price of one unit of the underlying instrument of the transaction and the number of units in the underlying instrument referenced by the transaction; where a transaction mapped to the equity risk category or commodity risk category is contractually expressed as a notional amount, institutions shall use the notional amount of the transaction rather than the number of units in the underlying instrument as the adjusted notional amount; for transactions mapped to the other risks category, institutions shall calculate the adjusted notional amount on the basis of the most appropriate method among the methods set out in points (a), (b) and (c), depending on the nature and characteristics of the underlying instrument of the transaction. where the notional amount or the number of units of the underlying instrument of a transaction is not fixed until its contractual maturity: for deterministic notional amounts and numbers of units of the underlying instrument, the notional amount shall be the weighted average of all the deterministic values of notional amounts or number of units of the underlying instrument, as applicable, until the contractual maturity of the transaction, where the weights are the proportion of the time period during which each value of notional amount applies; for stochastic notional amounts and numbers of units of the underlying instrument, the notional amount shall be the amount determined by fixing current market values within the formula for calculating the future market values; for contracts with multiple exchanges of the notional amount, the notional amount shall be multiplied by the number of remaining payments still to be made in accordance with the contracts; for contracts that provide for a multiplication of the cash-flow payments or a multiplication of the underlying of the derivative contract, the notional amount shall be adjusted by an institution to take into account the effects of the multiplication on the risk structure of those contracts. for transactions included in the netting sets referred to in Article 275(1), institutions shall use the following formula: where: MF | = | the maturity factor; M | = | the remaining maturity of the transaction which is equal to the period of time needed for the termination of all contractual obligations of the transaction; for that purpose, any optionality of a derivative contract shall be considered to be a contractual obligation; the remaining maturity shall be expressed in years using the relevant business day convention; where a transaction has another derivative contract as underlying instrument that may give rise to additional contractual obligations beyond the contractual obligations of the transaction, the remaining maturity of the transaction shall be equal to the period of time needed for the termination of all contractual obligations of the underlying instrument; where a transaction is structured to settle outstanding exposure following specified payment dates and where the terms are reset so that the market value of the transaction is zero on those specified dates, the remaining maturity of the transaction shall be equal to the time until the next reset date; and OneBusinessYear | = | one year expressed in business days using the relevant business day convention; for transactions included in the netting sets referred to in Article 275(2) and (3), the maturity factor is defined as: where: When determining the margin period of risk for transactions between a client and a clearing member, an institution acting either as the client or as the clearing member shall replace the minimum period set out in point (b) of Article 285(2) with five business days. MF | = | the maturity factor; MPOR | = | the margin period of risk of the netting set determined in accordance with Article 285(2) to (5); and OneBusinessYear | = | one year expressed in business days using the relevant business day convention. є = | | 1 for the hedging sets established in accordance with Article 277a(1) 5 for the hedging sets established in accordance with point (a) of Article 277a(2) 0,5 for the hedging sets established in accordance with point (b) of Article 277a(2) AddOnIR | = | the interest rate risk category add-on; j | = | the index that denotes all the interest rate risk hedging sets established in accordance with point (a) of Article 277a(1) and with Article 277a(2) for the netting set; and | = | the interest rate risk category add-on for hedging set j calculated in accordance with paragraph 2. єj | = | the hedging set supervisory factor coefficient of hedging set j determined in accordance with the applicable value specified in Article 280; SFIR | = | the supervisory factor for the interest rate risk category with a value equal to 0,5 %; and | = | the effective notional amount of hedging set j calculated in accordance with paragraph 3. End date (in years) > 0 and <= 1 > 1 and <= 5 > 5 | = | the effective notional amount of hedging set j; and Dj,k | = | the effective notional amount of bucket k of hedging set j calculated as follows: l | = | the index that denotes the risk position. AddOnFX | = | the foreign exchange risk category add on; j | = | the index that denotes the foreign exchange risk hedging sets established in accordance with point (b) of Article 277a(1) and with Article 277a(2) for the netting set; and | = | the foreign exchange risk category add-on for hedging set j calculated in accordance with paragraph 2. єj | = | the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; SFFX | = | the supervisory factor for the foreign exchange risk category with a value equal to 4 %; | = | the effective notional amount of hedging set j calculated as follows: l | = | the index that denotes the risk position. there shall be one credit reference entity for each issuer of a reference debt instrument that underlies a single-name transaction allocated to the credit risk category; single-name transactions shall be assigned to the same credit reference entity only where the underlying reference debt instrument of those transactions is issued by the same issuer; there shall be one credit reference entity for each group of reference debt instruments or single-name credit derivatives that underlie a multi-name transaction allocated to the credit risk category; multi-names transactions shall be assigned to the same credit reference entity only where the group of underlying reference debt instruments or single-name credit derivatives of those transactions have the same constituents. AddOnCredit | = | credit risk category add-on; j | = | the index that denotes all the credit risk hedging sets established in accordance with point (c) of Article 277a(1) and with Article 277a(2) for the netting set; and | = | the credit risk category add-on for hedging set j calculated in accordance with paragraph 3. | = | the credit risk category add-on for hedging set j; єj | = | the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; k | = | the index that denotes the credit reference entities of the netting set established in accordance with paragraph 1; | = | the correlation factor of the credit reference entity k; where the credit reference entity k has been established in accordance with point (a) of paragraph 1, , where the credit reference entity k has been established in accordance with point (b) of paragraph 1, ; and AddOn(Entityk) | = | the add-on for the credit reference entity k determined in accordance with paragraph 4. | = | the effective notional amount of the credit reference entity k calculated as follows: where: l = the index that denotes the risk position; and = the supervisory factor applicable to the credit reference entity k calculated in accordance with paragraph 5. for the credit reference entity k established in accordance with point (a) of paragraph 1, shall be mapped to one of the six supervisory factors set out in Table 3 of this paragraph on the basis of an external credit assessment by a nominated ECAI of the corresponding individual issuer; for an individual issuer for which a credit assessment by a nominated ECAI is not available: an institution using the approach referred to in Chapter 3 shall map the internal rating of the individual issuer to one of the external credit assessments; an institution using the approach referred to in Chapter 2 shall assign to that credit reference entity; however, where an institution applies Article 128 to risk weight counterparty credit risk exposures to that individual issuer, shall be assigned to that credit reference entity; for the credit reference entity k established in accordance with point (b) of paragraph 1: where a risk position l assigned to the credit reference entity k is a credit index listed on a recognised exchange, shall be mapped to one of the two supervisory factors set out in Table 4 of this paragraph on the basis of the credit quality of the majority of its individual constituents; where a risk position l assigned to the credit reference entity k is not referred to in point (i) of this point, shall be the weighted average of the supervisory factors mapped to each constituent in accordance with the method set out in point (a), where the weights are defined by the proportion of notional of the constituents in that position. Table 3 Table 4 Credit quality step | Supervisory factor for single-name transactions 1 | 0,38 % 2 | 0,42 % 3 | 0,54 % 4 | 1,06 % 5 | 1,6 % 6 | 6,0 % Dominant credit quality | Supervisory factor for quoted indices Investment grade | 0,38 % Non-investment grade | 1,06 % there shall be one equity reference entity for each issuer of a reference equity instrument that underlies a single-name transaction allocated to the equity risk category; single-name transactions shall be assigned to the same equity reference entity only where the underlying reference equity instrument of those transactions is issued by the same issuer; there shall be one equity reference entity for each group of reference equity instruments or single-name equity derivatives that underlie a multi-name transaction allocated to the equity risk category; multi-names transactions shall be assigned to the same equity reference entity only where the group of underlying reference equity instruments or single-name equity derivatives of those transactions, as applicable, has the same constituents. AddOnEquity | = | the equity risk category add-on; j | = | the index that denotes all the equity risk hedging sets established in accordance with point (d) of Article 277a(1) and Article 277a(2) for the netting set; and | = | the equity risk category add-on for hedging set j calculated in accordance with paragraph 3. | = | the equity risk category add-on for hedging set j; єj | = | the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; k | = | the index that denotes the equity reference entities of the netting set established in accordance with paragraph 1; | = | the correlation factor of the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1, ; where the equity reference entity k has been established in accordance with point (b) of paragraph 1, ; and AddOn(Entityk) | = | the add-on for the equity reference entity k determined in accordance with paragraph 4. AddOn(Entityk) | = | the add-on for the equity reference entity k; | = | the supervisory factor applicable to the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1, ; where the equity reference entity k has been established in accordance with point (b) of paragraph 1, ; and | = | the effective notional amount of the equity reference entity k calculated as follows: where: l = the index that denotes the risk position. AddOnCom | = | the commodity risk category add-on; j | = | the index that denotes the commodity hedging sets established in accordance with point (e) of Article 277a(1) and with Article 277a(2) for the netting set; and | = | the commodity risk category add-on for hedging set j calculated in accordance with paragraph 4. | = | the commodity risk category add-on for hedging set j; єj | = | the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; ρCom | = | the correlation factor of the commodity risk category with a value equal to 40 %; k | = | the index that denotes the commodity reference types of the netting set established in accordance with paragraph 2; and | = | the add-on for the commodity reference type k calculated in accordance with paragraph 5. | = | the add-on for the commodity reference type k; | = | the supervisory factor applicable to the commodity reference type k; where the commodity reference type k corresponds to transactions allocated to the hedging set referred to in point (e)(i) of Article 277a(1), excluding transactions concerning electricity, ; for transactions concerning electricity, ; and | = | the effective notional amount of the commodity reference type k calculated as follows: where: l = the index that denotes the risk position. AddOnOther | = | the other risks category add-on; єj | = | the index that denotes the other risk hedging sets established in accordance with point (f) of Article 277a(1) and Article 277a(2) for the netting set; and | = | the other risks category add-on for hedging set j calculated in accordance with paragraph 2. | = | the other risks category add-on for hedging set j; єj | = | the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; and SFOther | = | the supervisory factor for the other risk category with a value equal to 8 %; | = | the effective notional amount of hedging set j calculated as follows: where: l = the index that denotes the risk position. institutions shall not apply the treatment referred to in Article 274(6); by way of derogation from Article 275(1), for netting sets that are not referred to in Article 275(2), institutions shall calculate the replacement cost in accordance with the following formula: RC = max{CMV, 0} where: RC | = | the replacement cost; and CMV | = | the current market value. by way of derogation from Article 275(2) of this Regulation, for netting sets of transactions: that are traded on a recognised exchange; that are centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall calculate the replacement cost in accordance with the following formula: RC = TH + MTA where: RC | = | the replacement cost; TH | = | the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and MTA | = | the minimum transfer amount applicable to the netting set under the margin agreement; by way of derogation from Article 275(3), for multiple netting sets that are subject to a margin agreement, institutions shall calculate the replacement cost as the sum of the replacement cost of each individual netting set, calculated in accordance with paragraph 1 as if they were not margined; all hedging sets shall be established in accordance with Article 277a(1); institutions shall set to 1 the multiplier in the formula that is used to calculate the potential future exposure in Article 278(1), as follows: where: PFE | = | the potential future exposure; and AddOn(a) | = | the add-on for risk category a; by way of derogation from Article 279a(1), for all transactions, institutions shall calculate the supervisory delta as follows: where: δ = | | + 1 where the transaction is a long position in the primary risk driver – 1 where the transaction is a short position in the primary risk driver δ | = | the supervisory delta; the formula referred to in point (a) of Article 279b(1) that is used to compute the supervisory duration factor shall read as follows: supervisory duration factor = E – S where: E | = | the period between the end date of a transaction and the reporting date; and S | = | the period between the start date of a transaction and the reporting date; the maturity factor referred to in Article 279c(1) shall be calculated as follows: for transactions included in netting sets referred to in Article 275(1), MF = 1; for transactions included in netting sets referred to in Article 275(2) and (3), MF = 0,42; the formula referred to in Article 280a(3) that is used to calculate the effective notional amount of hedging set j shall read as follows: where: | = | the effective notional amount of hedging set j; and Dj,k | = | the effective notional amount of bucket k of hedging set j; the formula referred to in Article 280c(3) that is used to calculate the credit risk category add-on for hedging set j shall read as follows: where: | = | the credit risk category add-on for hedging set j; and AddOn(Entityk) | = | the add-on for the credit reference entity k; the formula referred to in Article 280d(3) that is used to calculate the equity risk category add-on for hedging set j shall read as follows: where: | = | the equity risk category add-on for hedging set j; and AddOn(Entityk) | = | the add-on for the credit reference entity k; the formula referred to in Article 280e(4) that is used to calculate the commodity risk category add-on for hedging set j shall read as follows: where: | = | the commodity risk category add-on for hedging set j; and | = | the add-on for the commodity reference type k. for netting sets of transactions: that are traded on a recognised exchange; centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall use the following formula: RC = TH + MTA where: RC | = | the replacement cost; TH | = | the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and MTA | = | the minimum transfer amount applicable to the netting set under the margin agreement; for all other netting sets or individual transactions, institutions shall use the following formula: RC = max{CMV, 0} where: RC | = | the replacement cost; and CMV | = | the current market value. the potential future exposure of a netting set is the sum of the potential future exposure of all the transactions included in the netting set, calculated in accordance with point (b); the potential future exposure of a single transaction is its notional amount multiplied by: the product of 0,5 % and the residual maturity of the transaction expressed in years for interest-rate derivative contracts; the product of 6 % and the residual maturity of the transaction expressed in years for credit derivative contracts; 4 % for foreign-exchange derivatives; 18 % for gold and commodity derivatives other than electricity derivatives; 40 % for electricity derivatives; 32 % for equity derivatives; the notional amount referred to in point (b) of this paragraph shall be determined in accordance with Article 279b(2) and (3) for all derivatives listed in that point; in addition, the notional amount of the derivatives referred to in points (b)(iii) to (b)(vi) of this paragraph shall be determined in accordance with points (b) and (c) of Article 279b(1); the potential future exposure of netting sets referred to in point (a) of paragraph 3 shall be multiplied by 0,42.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-12 · Text as adopted (Official Journal); later amendments are not incorporated in this text.