Interactive Single Rulebook

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Interactive Single Rulebook

Path Capital Requirements Regulation > PART THREE > TITLE II > CHAPTER 6 > Section 2 > Article 273 (Copy link to article)
Title Article 273
Description Methods for calculating the exposure value
Main content

1. Institutions shall determine the exposure value for the contracts listed in Annex II on the basis of one of the methods set out in Sections 3 to 6 in accordance with this Article.

An institution which is not eligible for the treatment set out in Article 94 shall not use the method set out in Section 4. To determine the exposure value for the contracts listed in point 3 of Annex II an institution shall not use the method set out in Section 4. Institutions may use in combination the methods set out in Sections 3 to 6 on a permanent basis within a group. A single institution shall not use in combination the methods set out in Sections 3 to 6 on a permanent basis but shall be permitted to use in combination methods set out in Sections 3 and 5 when one of the methods is used for the cases set out in Article 282(6).

2. Where permitted by the competent authorities in accordance with Article 283(1) and (2), an institution may determine the exposure value for the following items using the Internal Model Method set out in Section 6:

(a) the contracts listed in Annex II;

(b) repurchase transactions;

(c) securities or commodities lending or borrowing transactions;

(d) margin lending transactions;

(e) long settlement transactions.

 

4. Notwithstanding paragraph 3, an institution may choose consistently to include for the purposes of calculating own funds requirements for counterparty credit risk all credit derivatives not included in the trading book and purchased as protection against a non-trading book exposure or against a counterparty credit risk exposure where the credit protection is recognised under this Regulation.

For a given counterparty, the exposure value for a given netting set of OTC derivative instruments listed in Annex II calculated in accordance with this Chapter shall be the greater of zero and the difference between the sum of exposure values across all netting sets with the counterparty and the sum of CVA for that counterparty being recognised by the institution as an incurred write-down. The credit valuation adjustments shall be calculated without taking into account any offsetting debit value adjustment attributed to the own credit risk of the firm that has been already excluded from own funds under Article 33(1)(c).

7. Institutions shall determine the exposure value for exposures arising from long settlement transactions by any of the methods set out in Sections 3 to 6, regardless of which method the institution has chosen for treating OTC derivatives and repurchase transactions, securities or commodities lending or borrowing transactions, and margin lending transactions. In calculating the own funds requirements for long settlement transactions, an institution that uses the approach set out in Chapter 3 may assign the risk weights under the approach set out in Chapter 2 on a permanent basis and irrespective of the materiality of such positions.

Topics Credit risk ; Market risk