Version in force , Modified +1,737 −451§
Amended by Regulation (EU) 2019/2033 32019R2033 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2019/876 32019R0876 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2021/558 32021R0558 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2020/873 32020R0873 on EUR-Lex (external, EUR-Lex)
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Explanation, written by a model and checked against the cited text
The provision was retitled from Original Exposure Method to Replacement cost, and the entire content was replaced.
The earlier text set an exposure value based on notional amount percentages from a maturity table and allowed a choice between original or residual maturity for interest-rate contracts, while the later text instead sets out formulas for calculating replacement cost separately for netting sets without a margin agreement, single netting sets with a margin agreement, and multiple netting sets under the same margin agreement, defining terms such as CMV, VM, TH, MTA, VMMA and NICAMA.
The later text also adds a statement on how NICAMA may be calculated, at trade level, netting set level, or across all netting sets covered by the margin agreement.
Cited: Art. 275, v1 (external, EUR-Lex) · Art. 275, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex, before and after
texts differ too much for an inline diff; shown separately
Previous version, in force 28 December 2020 02013R0575-20201228
Article 275 Original Exposure Method 1. The exposure value is the notional amount of each instrument multiplied by the percentages set out in Table 3. Table 3 Original maturity Interest-rate contracts Contracts concerning foreign-exchange rates and gold One year or less 0,5 % 2 % Over one year, not exceeding two years 1 % 5 % Additional allowance for each additional year 1 % 3 % 2. For calculating the exposure value of interest-rate contracts, an institution may choose to use either the original or residual maturity.
this version, in force 28 June 2021 02013R0575-20210629
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:
RC = max{CMV – NICA, 0}
2. Institutions shall calculate the replacement cost for single netting sets that are subject to a margin agreement in accordance with the following formula:
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.
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:RCmaximaxCMVi, 0maxVMMANICAMA, 0, 0maximinCMVi, 0minVMMANICAMA, 0, 0
where:
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.
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.