Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR) as amended
Leverage ratio
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Delegated Regulation (EU) 2015/62 - DR with regard to the leverage ratio
Disclose name of institution / entity:
Type of submitter:
Credit institution
Subject Matter:
Application of margin period of risk scalars for cleared transactions

Do the margin period of risk scalars on cleared transactions, as laid out in Article 304(4) CRR, also apply to the calculation of the EAD for leverage ratio purposes?

Background on the question:

Article 304(4) CRR allows an institution acting as a clearing member to multiply its EAD by a scalar when calculating the own funds requirement for its exposures to a client in accordance with the Mark-to-Market Method, the Standardised Method or the Original Exposure Method.

The ability to apply the scalar for leverage purposes is not specifically mentioned, and in Article 429a, which determines how the derivative exposure value is to be calculated for leverage purposes, Article 304 is not specifically referenced.

In order to maintain consistency with regard to the treatment of cleared transactions, it would seem logical to apply the margin period of risk scalars to EAD for leverage purposes as well as for RWAs. This would be consistent with the overall principle that institutions should not be discouraged from providing clearing services. We assume that the references included in Article 429a(1) are not intended to be comprehensive.

Date of submission:
Published as Final Q&A:
EBA Answer:

The margin period of risk scalars, as laid out in Article 304(4) CRR, may not be applied for the purposes of determining the exposure value of centrally cleared derivatives for the purpose of calculating the leverage ratio. Pursuant to Article 304(4) CRR, the margin period of risk scalars may be applied to the EAD by an institution when calculating the own fund requirements for its exposures to a client as they reflect potentially lower risk levels in transactions with clients that are cleared via CCPs. According to Recitals 90 to 94 of the CRR, the leverage ratio is a distinct regulatory and supervisory tool, which is supplementary to risk-based own funds requirements. The exposure values of derivatives for the purpose of calculating the leverage ratio must be determined by institutions in accordance with Article 429a CRR.   

Final Q&A