Version in force , Modified +127 −30§
Amended by Regulation (EU) 2024/1623 32024R1623 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2024/2987 32024R2987 on EUR-Lex (external, EUR-Lex) · Regulation (EU) 2024/2795 32024R2795 on EUR-Lex (external, EUR-Lex)
Explanation, written by a model and checked against the cited text
Point (f) of Article 291(5) now refers to market risk calculations for default risk set out in Title IV, Chapter 1a, Section 4 or 5, or for default risk using an internal default risk model set out in Title IV, Chapter 1b, Section 3, replacing the prior reference to incremental default and migration risk calculations under Title IV, Chapter 5, Section 4.
Cited: Art. 291, v2 (external, EUR-Lex) · Art. 291, v1 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex, before and after
Previous version, in force 9 July 2024 02013R0575-20240709 → this version, in force 1 January 2025 02013R0575-20250101
Article 291
Wrong-Way Risk
1. For the purposes of this Article:
(a) General Wrong-Way risk arises when the likelihood of default by counterparties is positively correlated with general market risk factors;
(b) Specific Wrong-Way risk arises when future exposure to a specific counterparty is … 389 unchanged words … is legally connected with the counterparty. For transactions referencing a basket of names or index, the jump-to-default of the respective underlying obligations where the issuer is legally connected with the counterparty, shall be applied, if material;
(f) to the extent that this the calculation uses existing market risk calculations for own funds requirements for incremental default and migration risk as set out in Title IV, Chapter 5, 1a, Section 4 or 5, or for default risk using an internal default risk model as set out in Title IV, Chapter 1b, Section 3, that already contain an LGD assumption, the LGD in the formula used shall be 100 %.
6. Institutions shall provide senior management and the appropriate committee of the management body with regular reports on both Specific and General Wrong-Way risks and the steps being taken to manage those risks.