Question ID:
2015_1861
Legal Act:
Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 – CRR2
Topic:
Leverage ratio
Article:
429b
Paragraph:
1-6
COM Delegated or Implementing Acts/RTS/ITS/GLs:
Not applicable
Article/Paragraph:
n/a
Name of institution / submitter:
Eurex Clearing AG / Clearstream Holding
Country of incorporation / residence:
Germany
Type of submitter:
Competent authority
Subject Matter:
Counterparty credit risk add-on for repurchase transactions
Question:
Is it required to calculate and report this counterparty credit risk add-on also for cash borrowers in repo transactions or for the borrowers in securities lending transactions?
Background on the question:
Article 429b of Regulation (EU) No 575/2013 (CRR)(as inserted by Commission Delegated Regulation (EU) 2015/62) foresees a counterparty credit risk add-on for repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions. In the formula to calculate the add-on 'E' is defined as the fair value of securities or cash lent and 'C' is defined as the fair value of securities or cash received.
Date of submission:
02/03/2015
Published as Final Q&A:
10/07/2015
EBA Answer:

The requirement under Article 429b of Regulation (EU) No 575/2013 (CRR)(as inserted by Commission Delegated Regulation (EU) 2015/62) to include in the exposure measure an add-on for counterparty credit risk applies to all of the transactions listed in Article 429b(1) of Regulation (EU) 575/2013 (CRR).

Thus, the add-on is to be included in particular for those repurchase transactions where an institution has received cash (which qualifies as 'fair value of cash received' for Ci in Article 429b(2) or (3) CRR) in exchange for transferring a security that the institution is obliged to repurchase at a later date (which qualifies as 'fair value of securities lent' for Ei in Article 429b(2) or (3) CRR).

The add-on is also to be included for securities borrowing transactions for which the borrowed security qualifies as 'fair value of securities received' for Ci in Article 429b(2) or (3) CRR, independent of whether cash or another security has been posted in exchange (which qualifies as 'fair value of cash or securities lent' for Ei in Article 429b(2) or (3) CRR). Note, however, that the formula in Article 429b(2) CRR results in an add-on of Ei* = 0 where no cash or security has been posted in exchange for the borrowed security.

Status:
Final Q&A