Single Rulebook Q&A

Question ID: 2017_3099
Legal act : Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/876 – CRR2
Topic : Market risk
Article: 350
Paragraph: 1
Subparagraph:
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
Article/Paragraph : NA
Type of submitter: Credit institution
Subject matter : Market risk capital requirement for CIUs where a look-through approach is applied
Question:

Can the market risk capital requirement for CIUs where a look-through approach based on the underlying investments is applied be capped at the amount applicable if no look-through approach would be applied?

Background on the question:

If an institution is aware of the underlying investments of a CIU on a daily basis, the market risk capital requirement may be determined by a look-through to the underlying investments, see CRR Art. 350 (1). If the underlying investments are not known on a daily basis the market risk capital requirement is in general determined based on CRR Art. 348 as 32% for position risk. Alternatively CRR Art. 350 (3) allows for a look-through based on the mandate of the CIU. If CRR Art. 350 (3) is applied, the CRR in point (c) specifically introduces a cap of the market risk capital requirement at the amount that would be applicable if no look-through would be performed, i.e. 32% for position risk. As CIUs where the underlying investments are known on a daily basis operate within the limits set by their mandate, it would be appropriate to apply this 32% cap also to CIUs where a look-through based on the underlying investments is applied.

Date of submission: 17/01/2017
Published as Final Q&A: 12/05/2017
EBA answer:

The 32% cap stipulated in Article 350(3)(c) of Regulation (EU) No 575/2013 (CRR) is applied where an institution is not aware of the underlying investments of a CIU on a daily basis subject to the conditions set out in paragraph (3). The cap cannot be applied when using the look-though approach set out in Article 350(1) CRR.

Status: Final Q&A
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